Amegy Bank Nat'l Ass'n v. DB Private Wealth Mortg., Ltd.

• Decision Date: 24 February 2014
• Docket Number: Case No: 2:12-cv-243-FtM-38UAM
• Parties: AMEGY BANK NATIONAL ASSOCIATION, Plaintiff, v. DB PRIVATE WEALTH MORTGAGE, LTD. and DEUTSCHE BANK ALEX.BROWN, Defendants.
• Court: U.S. District Court — Middle District of Florida

AMEGY BANK NATIONAL ASSOCIATION, Plaintiff, v. DB PRIVATE WEALTH MORTGAGE, LTD.and DEUTSCHE BANK ALEX.BROWN, Defendants.

Case No: 2:12-cv-243-FtM-38UAM

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA FORT MYERS DIVISION

Dated: February 24, 2014

ORDER¹

This matter comes before the Court on the Parties, Plaintiff Amegy Bank N.A. (hereinafter "Amegy") and Defendants DB Private Wealth Mortgage, Ltd. and Deutsche Bank Alex.Brown (hereinafter "Deutsche Bank"), separate motions for summary judgment. There is a pending motion for partial summary judgment with regard to Deutsche Bank's affirmative defenses and there are pending motions for summary judgment with regard to the underlying claims in this matter. (Doc. #65, Doc. #73, Doc. #75, Doc. #76, Doc. #95).These motions are now ripe for review.

FACTS

In 2008, Amegy loaned William B. Johnson and his single member limited liability company, Monarch Flight II, LLC, 15 million dollars to purchase and then repair and upgrade a 1983 Gulfstream Jet, to complete a development project in the Bahamas, known as Orchid Bay, and for other purposes. (Doc. #73-2, ¶8). Johnson executed a Promissory Note obligating Monarch Flight to pay Amegy the loan amount plus interest in monthly payments by May 1, 2011. (Doc. #73-2). As collateral for the loan, Johnson assigned and granted to Amegy a security interest in 825,457 units of partnership interest in Host Hotels & Resorts, L.P., any shares of the Host Hotels & Resorts, Inc. owned by Johnson as a result of the redemption or exchange of the partnership units, and all products and proceeds from the partnership units and/or related stock. (Doc. #73-4, §1.1). The security agreement between Amegy and Johnson explicitly forbade Johnson from selling, assigning, conveying, pledging, or otherwise disposing of the partnership units or the related stock without the prior written consent of Amegy. (Doc. #73-4, §3.2). Upon an "Event of Default" as defined in the Promissory Note, the Security Agreement granted Amegy all rights and remedies of a secured party under the Uniform Commercial Code (hereinafter "UCC"), including the ability to collect, receive, or take possession of the partnership units and related stock. (Doc. #73-4, §5.2). On May 7, 2008, Amegy filed a UCC-1 Financial Statement perfecting its security interest in Johnson's partnership units and related stock. (Doc. #73-5).

In October 2008, Monarch Flight defaulted on the loan. Meanwhile, on or about May 22, 2009, Deutsche Bank created a Know Your Customer (hereinafter "KYC") searchwith regard to Johnson.² (Doc. #73-10; Doc. #76; Doc. #81-1, at p.78, at 10-23; Doc. #86-1). William Rhodes, a Managing Director of Deutsche Bank Securities, had access to the information provided in the KYC report. (Doc. #73-11). Christian Barsi, an employee of Deutsche Bank Private Wealth Management, also had access to the information provided in the KYC report. (Doc. #73-34, at 46; Doc. #73-23; Doc. #65-58). This KYC report included information regarding Amegy's UCC-1 Financial Statement. (Doc. #73-10).

On October 28, 2009, Amegy sent Johnson a letter with regard to Monarch Flight that requested information in connection with the Promissory Note. (Doc. #73-14). Amegy specifically requested the following by November 13, 2009, "(a) A recent financial statement of Borrower [Monarch Flight], containing balance sheets, statements of income and statements of members' capital; (b) A recent financial statement of Guarantor; (c) Access to the Aircraft so that we may conduct an appraisal of the Aircraft; (d) The limited partnership agreement of Host Hotels & Resorts, L.P.; and (e) Documentation showing the history of dividends received by Guarantor from the Partnership Units." (Doc. #73-14). Johnson's attorney, John T. Bobo, confirmed that he would provide, or at least try to, the information requested and the access to the aircraft upon completion of its renovation.³ (Doc. #73-15).

On December 10, 2009, Amegy sent an additional letter to Monarch Flight that directed attention to Johnson. (Doc. #73-16). This letter informed Monarch Flight andJohnson that Amegy had not received all of the information it requested in its letter dated October 28, 2009. (Doc. #73-16). Instead, Amegy had only received documentation showing the history of dividends received by Johnson from partnership units in Host Hotels and Resorts, L.P. (Doc. #73-16; Doc. #73-1, ¶5). Accordingly, this letter again requested the information and requested access to the aircraft that Amegy had not yet received. (Doc. #73-16; Doc. #73-14). This letter also demanded Monarch Flight to pay the "Required Paydown," also referred to as the "Mandatory Prepayment," of $7,500,000.00 pursuant to the Promissory Note no later than December 31, 2009. (Doc. #73-16; Doc. #73-2, at ¶6(b)⁴). In response and through Bobo, Monarch Flight provided the requested information less Johnson's financial statement.⁵ (Doc. #73-17).

Just a few days later, Johnson submitted a notice of redemption to Host Hotels & Resorts, L.P. seeking to "expeditiously" dispose of his Partnership Units. (Doc. #73-18). Johnson represented that this Host Stock was unencumbered, free and clear of the rights of or interests of any other person or entity, and that he had the full right, power and authority to redeem and surrender such Units. (Doc. #65-18). Host Hotels & Resorts, Inc. elected to purchase Johnson's interest in the partnership and pay him with shares of stock in Host Hotels & Resorts, Inc. as consideration of acquiring Johnson's partnership units. (Doc. #60, ¶3.11; Doc. #60; ¶3.11). This was done despite the language in the Promissory Note that "Debtor shall not sell, assign, convey, pledge or otherwise dispose of theCollateral or any part thereof without the prior written consent of Secured Party." (Doc. #73-4, §3.2).

On January 12, 2010, Bobo emailed Amegy's counsel and stated "Mr. Johnson is in the process of closing a transaction and will make the January payment in approximately ten days." (Doc. #73-24). There is evidence that Johnson made a payment to Amegy on January 26, 2010. (Doc. #73-7, at 18). Nonetheless, also on January 12, 2010, Rhodes, Managing Director of Deutsche Bank Securities, sent an email with the subject of the email being William B. Johnson. (Doc. #73-26). This email simply stated, "We open[]ed an account for him to do a loan last year. Please take that information and let me know what we need to do to set it up to trade stocks. Need FAST." (Doc. #73-26). Just a few days later, through Rhodes, Johnson opened a margin account at Defendant Deutsche Bank Alex.Brown. (Doc. #73-27; Doc. #75, at 10; Doc. #85-1, at 43). After receiving the official stock certificate for Johnson's 843,199 shares in Host, the stock was sold and $9,516.052.12 was deposited into Johnson's Deutsche Bank Alex.Brown brokerage account. (Doc. #85-17; Doc. #85-15). This money was then transferred to Johnson's JP Morgan Chase Bank, N.A. (Doc. #85-16; Doc. #85-18).

Without Amegy's knowledge or consent, Johnson paid at least $98,177.25 of the funds to DB Private Wealth Management on a mortgage loan given by Deutsche Bank made on a real property known as Spyglass. Johnson also paid $407,394.04 to non-party contractors to make improvements on the Spyglass property and an additional $81,849.39 to Collier County Tax Collector to discharge tax obligations on the property. DB Private Wealth Management holds a first priority security interest and lien on the Spyglass property, which is otherwise unrelated to the Amegy transaction.

STANDARD

Adjudications of partial summary judgment motions are authorized under Fed. R. Civ. P. 56(d) and are governed by the standards for summary judgment in Fed. R. Civ. P. 56(c). See e.g., Johns v. Jarrard, 951 F.2d 551, 554-56 (11 th Cir. 1991). Partial summary judgment rulings are not immutable and have no res judicata effect; they may under appropriate circumstances be revisited. Burge v. Parish of St. Tammany, 187 F.3d 452, 467 (5th Cir. 1999). Parties, however, are entitled to rely on the conclusiveness of the partial summary adjudication and absent good cause the Court will not generally revisit or alter the issues adjudicated under Rule 56(d). Carr v. O'Leary, 167 F.3d 1124, 1126 (7th Cir. 1999). The Rule reads in pertinent part:

[i]f on motion under this rule judgment is not rendered upon the whole case or for all the relief asked and a trial is necessary, the court at the hearing of the motion, by examining the pleadings and the evidence before it and by interrogating counsel, shall if practicable ascertain what material facts exist without substantial controversy and what material facts exist without substantial controversy and what material facts are actually and in good faith controverted. It shall thereupon make an order specifying the facts that appear without substantial controversy, including the extent to which the amount of damages or other relief is not in controversy, and directing such further proceedings in the action as are just. Upon the trial of action the facts so specified shall be deemed established, and the trial shall be conducted accordingly.

Fed. R. Civ. P. 56(d).

Summary judgment is appropriate only when the Court is satisfied that "there is no genuine issue as to any material fact" and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). An issue is genuine if there is sufficient evidence such that a reasonable jury could return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 U.S. 2505, 91 L. Ed. 2d 202 (1986). Similarly, an issue is material if it may affect the outcome of the suit under governing law. Id.

The moving party bears the burden of showing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). In deciding whether the moving party has met this initial burden, the Court must review the...