BancorpSouth Bank v. Hazelwood Logistics Ctr., LLC

Decision Date14 February 2013
Docket Number11–3741.,Nos. 11–3611,s. 11–3611
PartiesBANCORPSOUTH BANK, a Mississippi Banking Corporation, Plaintiff–Appellee v. HAZELWOOD LOGISTICS CENTER, LLC, formerly known as Hazelwood Commerce Center LLC; Hazelwood Commerce Redevelopment Corporation; Paul J. McKee Jr., Individually; Paul J. McKee Jr., in his capacity as Trustee of the Paul J. McKee Jr. Revocable Trust, Defendants–Appellants. Murphy Property Tax, Intervenor–Appellant BancorpSouth Bank, a Mississippi Banking Corporation, Plaintiff–Appellee v. Hazelwood Logistics Center, LLC, formerly known as Hazelwood Commerce Center LLC; Hazelwood Commerce Redevelopment Corporation; Paul J. McKee, Jr., Individually; Paul J. McKee, Jr., in his capacity as Trustee of the Paul J. McKee Jr. Revocable Trust, Defendants.
CourtU.S. Court of Appeals — Eighth Circuit

706 F.3d 888

BANCORPSOUTH BANK, a Mississippi Banking Corporation, Plaintiff–Appellee
v.
HAZELWOOD LOGISTICS CENTER, LLC, formerly known as Hazelwood Commerce Center LLC; Hazelwood Commerce Redevelopment Corporation; Paul J. McKee Jr., Individually; Paul J. McKee Jr., in his capacity as Trustee of the Paul J. McKee Jr.
Revocable Trust, Defendants–Appellants.
Murphy Property Tax, Intervenor–Appellant
BancorpSouth Bank, a Mississippi Banking Corporation, Plaintiff–Appellee
v.
Hazelwood Logistics Center, LLC, formerly known as Hazelwood Commerce Center LLC; Hazelwood Commerce Redevelopment Corporation; Paul J. McKee, Jr., Individually; Paul J. McKee, Jr., in his capacity as Trustee of the Paul J. McKee Jr.
Revocable Trust, Defendants.

Nos. 11–3611, 11–3741.

United States Court of Appeals,
Eighth Circuit.

Submitted: Sept. 19, 2012.
Filed: Feb. 14, 2013.


[706 F.3d 891]


Joseph R. Dulle, argued, Paul J. Puricelli, Robb Hellwig, on the brief, Saint Louis, MO, for appellant Hazelwood Logistics, et al.

Thomas L. Caradonna, argued, Derick C. Albers, on the brief, Saint Louis, MO, for appellant Murphy Property Tax.


Nancy G. Lischer, argued, Chicago, IL, David G. Asmus, Saint Louis, MO, Mark D. Bauman, Belleville, IL, on the brief, for appellee.

Before RILEY, Chief Judge, SMITH and COLLOTON, Circuit Judges.

RILEY, Chief Judge.

BancorpSouth Bank (bank), successor by merger to The Signature Bank, sued Hazelwood Logistics Center, LLC and Hazelwood Commerce Redevelopment Corporation (collectively, HLC), and Paul J. McKee, Jr., both individually and in his capacity as Trustee of the Paul J. McKee, Jr. Revocable Trust, (McKee and, collectively with HLC, Hazelwood), alleging breach of contract against HLC, breach of guaranty against McKee, and asserting a security interest in some of HLC's property. Hazelwood raised lack of subject matter jurisdiction, improper venue and choice of forum, and a state law contract defense. Murphy Property Tax (MPT) intervened, claiming priority over real property tax refunds owed to HLC and attached by the bank. The district court 1 found jurisdiction and venue were proper and granted summary judgment to the bank on the breach of contract, breach of guaranty, and priority issues. Hazelwood and MPT appeal.

I. BACKGROUNDA. Factual Background
1. Financing

HLC was formed to implement a commercial real estate development project, known as the Hazelwood Logistics Center, in the City of Hazelwood, Missouri. To finance the development, HLC and the bank entered into a Land Acquisition Loan Agreement (acquisition agreement) on October 7, 2005, and a Development Loan Agreement (development agreement) on August 11, 2006 (collectively, as amended loan agreements). All Hazelwood parties are Missouri citizens, and the bank is a Mississippi citizen.

Under the loan agreements, the bank agreed to loan HLC up to the maximum principal amount of $36,242,700. The loan was evidenced by a promissory note in the principal amount of $35,197,500, as amended. HLC granted the bank a security interest in its assets relating to the property, including “all general intangibles” and “all Tax ... Deposits.” McKee guaranteed HLC's obligations under the loan agreements (guaranty).

On August 11, 2006, the bank entered into a participation agreement with four other banks, whereby the bank sold the participating banks undivided interests in the loan. At the time this lawsuit was

[706 F.3d 892]

filed, the four participating banks were Heartland Bank, Centrue Bank, Excel Bank, and Sun Security Bank (participating banks). The participating banks collectively held approximately 69% of the loan, and the bank retained the balance. At least three of the participating banks were citizens of Missouri.

Under the participation agreement, the bank retained primary authority to administer the loan, subject to a few minor exceptions. The bank “h[e]ld in its name (as payee, endorsee or assignee), and ha[d] title to and retain[ed] possession or control of, the Loan Documents and all other security documents, papers and other items provided for or required under the Loan Documents.” The agreement provided that, in dealing with Hazelwood and with third parties, the bank was “considered to be the sole owner and holder of the Loan,” and the bank, after reasonable efforts to collect, “without the consent of the [participating banks], [could] proceed to foreclose upon the collateral securing the Loan by appropriate proceedings.” The bank could not decrease the interest rate under the loan, increase the amount of the loan, or extend the maturity of the loan, without the participating banks' prior written consent.

2. Development

Part of the Hazelwood property (property or Hazelwood property) was a former landfill site and required environmental remediation before it could be put to commercial use. Hazelwood hired contractors to prepare and implement a remedial action plan to address the property's environmental issues. Hazelwood and the bank contend the contractors negligently caused methane gas to spread “across portions of the [p]roperty previously uncontaminated by methane.” Hazelwood's expert witness reported:

In its present condition the ... property cannot be developed for commercial use. The presence of landfill gas, specifically methane, in the subsurface soil at the property is impairing development at the property. Extensive additional investigation is needed before developing remedial alternatives for addressing methane concerns at the site.

On October 30, 2009, the loan matured, and Hazelwood failed to pay the amount owed.

3. Tax Refunds

MPT is a commercial property tax consulting firm. On July 1, 2009, HLC and MPT entered into an agreement for MPT to review HLC's property tax liability “for the 2007/2008 and 2009/2010 assessment years.” HLC agreed to pay MPT a contingency “fee of thirty five percent (35%) of the tax savings for each of the 2007 thru 2009 assessment years.” MPT contends the bank was aware of HLC's contract with MPT and “underst[ood] that MPT's fee was to be paid out of any tax refunds procured.” MPT successfully obtained tax refunds for HLC in the amount of $465,379, plus interest.

B. Procedural History

On April 7, 2010, the bank sued the various Hazelwood parties for respective breaches of contract, breaches of the guaranty, and related claims, invoking the district court's diversity jurisdiction. See28 U.S.C. § 1332(a)(1). Hazelwood moved to dismiss the action based on the loan agreements' and guaranty's choice of venue provisions and Hazelwood's claim the district court lacked subject matter jurisdiction. The district court denied these motions.

The bank moved for a prejudgment writ of attachment on HLC's expected real property tax refunds. The district court granted the motion on August 6, 2010.

[706 F.3d 893]

The Missouri State Tax Commission disbursed tax refunds of $466,128.37 to the bank pursuant to the writ of attachment. MPT moved to intervene, asserting an interest in the tax refunds. The district court granted MPT's motion to intervene.

The bank moved for summary judgment against Hazelwood and MPT, and MPT moved for summary judgment against the bank. Hazelwood resisted the bank's motion for summary judgment, arguing the various loan contracts were not enforceable under the doctrine of commercial frustration. The district court denied MPT's motion for summary judgment, and granted the bank's motions for summary judgment against Hazelwood and MPT.

The district court's order granting summary judgment on the bank's claims against Hazelwood did not enter a damages amount. The bank moved pursuant to Federal Rule of Civil Procedure 59(e) for an amended judgment entering an amount of damages. The bank filed the motion on November 28, 2011, five days after the district court's entry of judgment and three days after Hazelwood filed its notice of appeal to this court. Hazelwood opposed the bank's motion to amend, arguing (1) the motion was procedurally improper under Federal Rule of Civil Procedure 60(a), and (2) the bank's motion for summary judgment was not supported by sufficient evidence and suffered from a procedural defect. The district court granted the bank's motion.

Hazelwood and MPT appeal. Having jurisdiction under 28 U.S.C. § 1291, we affirm.

II. DISCUSSIONA. Standard of Review and Choice of Law

“We review de novo a district court's grant of summary judgment, viewing all facts and making all reasonable inferences in the light most favorable to the nonmoving party.” Cent. Platte Natural Res. Dist. v. U.S. Dep't of Agric., 643 F.3d 1142, 1146 (8th Cir.2011). We affirm summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Cent. Platte Natural Res. Dist., 643 F.3d at 1146.

In this diversity case, we apply the substantive law that would be applied by a Missouri state court. See Schwan's Sales Enters. v. SIG Pack, Inc., 476 F.3d 594, 595–96 (8th Cir.2007). The loan agreements and guaranty provide Missouri law governs the interpretation and application of the contracts. Under Missouri law, “[a] valid choice of law provision in a contract binds the parties,” State ex rel. McKeage v. Cordonnier, 357 S.W.3d 597, 600 (Mo.2012) (en banc), and the parties here—including MPT, whose contract with HLC was made and performed in Missouri—do not contend any law other than Missouri law applies. The loan agreements each additionally provide the “Loan Agreement and other Loan Documents shall not be construed against [the bank] merely because of the involvement of [the bank] in the preparation of such documents and agreements.”

B. Subject Matter Jurisdiction

We first address whether the district court had subject matter jurisdiction over this case. See, e.g., Associated Ins. Mgmt. Corp. v. Ark. Gen. Agency, Inc., 149 F.3d 794, 796 (8th Cir.1998). “ ‘[D]iversity of citizenship is determined by reference to the parties named in the proceeding...

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