Hari Aum, LLC v. First Guar. Bank (In re Hari Aum, LLC)

• Decision Date: 16 April 2013
• Docket Number: No. 11–31218.,11–31218.
• Citation: 714 F.3d 274
• Parties: In the Matter of HARI AUM, LLC, doing business as Deluxe Motel, Debtor. Hari Aum, LLC, doing business as Deluxe Motel, Appellant, v. First Guaranty Bank, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

714 F.3d 274

In the Matter of HARI AUM, LLC, doing business as Deluxe Motel, Debtor.Hari Aum, LLC, doing business as Deluxe Motel, Appellant,

v.First Guaranty Bank, Appellee.

No. 11–31218.

United States Court of Appeals, Fifth Circuit.

April 16, 2013.

Robin R. De Leo, Attorney, De Leo Law Firm, Mandeville, LA, Tommy W. Thornhill, Mitch Adam Palmer, Thornhill Law Firm, Slidell, LA, for Appellant.

Andre Gerard Coudrain, Cashe, Coudrain & Sandage, Hammond, LA, Christy Renee Bergeron, Kingsmill Riess, L.L.C., New Orleans, LA, for Appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before STEWART, Chief Judge, and DAVIS and CLEMENT, Circuit Judges.

CARL E. STEWART, Chief Judge:

This matter involves an appeal from a bankruptcy judge's interlocutory order and judgment. The bankruptcy court ruled on cross-motions for partial summary judgment in favor of Appellee First Guaranty Bank (“FGB”) that the Multiple Indebtedness Mortgage that FGB recorded is valid, and that the property underlying that mortgage, the Deluxe Motel, secures both the loan FGB made to Debtor–Appellant Hari Aum LLC (“Hari Aum”) and the loan FGB made to a second entity, Mississippi Hospitality Services LLC. We now AFFIRM.

I.

In 2005, Hari Aum, a limited liability company (“LLC”) that one Suresh Bhula (“Bhula”) wholly owned, borrowed $1.8 million from FGB to finance the purchase of the Deluxe Motel in Slidell, Louisiana. As the 100% shareholder, sole officer, and managing member of Hari Aum, Bhula signed both a promissory note and a Multiple Indebtedness Mortgage (“MIM”), dated January 27, 2005, on Hari Aum's behalf to evidence and secure the $1.8 million loan. Also on January 27, Hari Aum, through Bhula, signed a commercial security agreement giving FGB a security interest in all equipment, furniture, fixtures, and an assignment of rents and leases in the Deluxe Motel property. The MIM was properly recorded in St. Tammany Parish, Louisiana on February 1, 2005.

The pertinent sections of the MIM are as follows:

1.MORTGAGE SECURING FUTURE INDEBTEDNESS. This Mortgage has been executed by [Hari Aum] pursuant to Article 3298 of the Louisiana Civil Code for the purpose of securing [Hari Aum's] Indebtedness that may now be existing or that may arise in the future as provided herein.... However, nothing under this Mortgage shall be construed as limiting the duration of this Mortgage or the ... purposes for which [Hari Aum's] Indebtedness may be requested or extended.

(italicized emphases added).

2.INDEBTEDNESS. The word “Indebtedness” as used in this Mortgage means individually, collectively and interchangeably any and all present and future loans, advances, and/or other extensions of credit obtained and/or to be obtained by [Hari Aum] from [FGB] ... including without limitation, a Note dated January 27, 2005, in the principal amount of $1,800,000.00, from [Hari Aum] to [FGB], and any and all amendments thereto and/or substitutions therefor, and any and all renewals, extensions and refinancings thereof, as well as any and all other obligations, including, without limitation, [Hari Aum's] covenants and agreements in any present or future loan or credit agreement or any other agreement, document or instrument executed by [Hari Aum] and liabilities that [Hari Aum] may now and/or in the future owe to and/or incur in favor of [FGB], whether direct or indirect, ... and whether now existing or hereafter arising ... whether [Hari Aum] is obligated alone or with others on a “ solidary ” ¹or “ joint and several ” basis, as a principal obligor or as a surety, guarantor, or endorser, of every nature and kind whatsoever .... Notwithstanding any other provision of this Mortgage, the maximum amount of Indebtedness secured hereby shall be limited to $50,000,000.00.”

(italicized emphases added).

Thus, the notable features of the MIM's definition of “Indebtedness” are: 1) the MIM secures present and future loans between Hari Aum and FGB; 2) the obligation broadly contemplates and includes the debts of third parties, whether Hari Aum is the principal obligor or obligated on a “joint and several” basis with others; and 3) the maximum amount of the Indebtedness secured is limited to $50 million. The MIM also states that Hari Aum pledged the Deluxe Motel as security for Hari Aum's “Indebtedness” between itself and FGB. Notably, only Hari Aum and FGB are parties to this MIM. Additionally, the MIM provides the mechanisms for cancellation of the instrument in the provision entitled, “Duration of Mortgage.”

Bhula and FGB continued their relationship in 2006, when Bhula obtained a commitment letter from FGB, dated May 31, 2006, by which FGB agreed to finance the purchase of a hotel in Hattiesburg, Mississippi through a new entity that was not yet formed. Thereafter, Bhula formed a second LLC, Mississippi Hospitality Services, LLC (“MHS”), of which Bhula was also the 100% shareholder, sole officer, and managing member. The loan between FGB and MHS was for $4.9 million, and was secured by a deed of trust that was properly recorded in Forrest County, Mississippi on June 19, 2006. MHS also entered into a commercial security agreement with FGB, dated June 16, 2006, which gave FGB a security interest in all inventory, equipment, general intangibles, consumer goods and fixtures, and an assignment of rents and leases for the Hattiesburg property. The commitment letter specifically states that the Deluxe Motel and the 160–unit hotel in Hattiesburg were to serve as collateral for FGB's loan to MHS. The pertinent documents that Bhula executed in 2006 in connection with the MHS loan do not demonstrate that the parties took any specific steps to encumber the Deluxe Motel property as security for the MHS loan at that time, however.

Also on May 31, 2006, the U.S. Small Business Administration (“SBA”) advanced a Disaster Loan in the amount of $735,000 to Hari Aum to repair roof damage associated with Hurricane Katrina. Hari Aum, through Bhula, signed a note and multiple indebtedness mortgage in favor of the SBA on June 13, 2006, and this mortgage was recorded in St. Tammany Parish, Louisiana on July 10, 2006. Pursuant to this filing, Hari Aum granted the SBA a second mortgage interest on the Deluxe Motel.

On April 21, 2009, FGB refinanced both Hari Aum's $1.8 million loan and MHS's $4.9 million loan. Bhula signed new promissory notes on behalf of each of the LLCs, as well as a commercial guaranty personally obligating Bhula on Hari Aum's loan. Also on April 21, Bhula executed two other documents: 1) A Limited Liability Company Resolution to Borrow/Grant Collateral (“Resolution”), on behalf of Hari Aum; and 2) Hari Aum's Acknowledgment of Existing Multiple Indebtedness Mortgage (“Acknowledgment”). In addition to the 2005 MIM, the Resolution, the Acknowledgment, and the 2009 MHS promissory note are the central documents to our resolution of this appeal.

The Resolution broadly authorizes Bhula to pledge Hari Aum's real property as security for any future indebtedness. The company grants Bhula the authority to enter into transactions concerning the company's real estate, including the pledging of collateral to secure debt between Hari Aum and FGB. The Resolution states, in pertinent part:

RESOLUTIONS ADOPTED. At a meeting of the members of [Hari Aum], duly called and held on April 21, 2009, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted.²

MEMBER. The following named person is a member of HARI AUM, LLC: Suresh A. Bhula, Member [designated as an authorized person]

ACTIONS AUTHORIZED. Any one (1) of the authorized person listed above may enter into any agreements of any nature with [FGB], and those agreements will bind [Hari Aum]. Specifically, but without limitation, any one (1) of such authorized person is authorized, empowered, and directed to do the following for and on behalf of [Hari Aum]:....

Grant Security.To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to [FGB] any property now or hereafter belonging to [Hari Aum] or in which [Hari Aum] now or hereafter may have an interest, including without limitation all of [Hari Aum's] real (immovable) property ... as security for the payment of any loans or credit accommodations so obtained ... or any other or further indebtedness of [Hari Aum] to [FGB].... Such property may be mortgaged, pledged, transferred, endorsed, hypothecated, encumbered or otherwise secured.....

Execute Security Documents. To execute and deliver to [FGB] the forms of mortgage, collateral mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which [FGB] may require which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given....

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and [FGB] may rely on it until written notice of its revocation shall have been delivered to and received by [FGB] at [FGB's] address shown above.

(italicized emphases added).

The Acknowledgment indicates that Hari Aum's 2005 MIM “shall secure any and all of [MHS's] and [Hari Aum's] present and future indebtedness in favor of [FGB],” and that Hari Aum and MHS will be jointly and severally liable for all indebtedness, including the MIM and MHS's promissory note with FGB. The Acknowledgment identifies MHS as the “Borrower,” Hari Aum as the “Grantor,” and FGB as the “Lender.” The Acknowledgment provides, in relevant part, as follows:

MULTIPLE INDEBTEDNESS MORTGAGE. Desiring to secure the prompt and punctual payment and satisfaction of present and future Indebtedness may be outstanding from...