Bank v. Point Clear Dev., LLC

• Decision Date: 18 June 2012
• Docket Number: CIVIL ACTION 11-0657-WS-M
• Citation: Whitney Bank v. Point Clear Dev., LLC, CIVIL ACTION 11-0657-WS-M (S.D. Ala. Jun 18, 2012)
• Parties: WHITNEY BANK, Plaintiff, v. POINT CLEAR DEVELOPMENT, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

WHITNEY BANK, Plaintiff,

v.POINT CLEAR DEVELOPMENT, LLC, et al., Defendants.

CIVIL ACTION 11-0657-WS-M

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

Dated: June 18, 2012

ORDER

This matter comes before the Court on plaintiff's Motion for Summary Judgment (doc. 34), as supplemented at document 43. Also pending is the Mitchell Defendants' Motion to Strike (doc. 46). The Motions are now ripe for disposition.

I. Background.

This case, like many filed in this District Court of late, arises from an unpaid promissory note and a financial institution's attempts to collect the debt from both the borrower and certain guarantors. Plaintiff, Whitney Bank ("Whitney"), brought this action against a host of defendants, including Point Clear Development, LLC ("Point Clear"), J. Myles Reed, Barton E. Kaiser, Thomas W. Mitchell, and Thomas E. Mitchell, alleging state-law causes of action against Point Clear for breach of its repayment obligations under a note, and against the other defendants for breach of separate continuing guaranties.¹ Federal jurisdiction was properly predicated on 28U.S.C. § 1332, inasmuch as the Amended Complaint sufficiently alleges complete diversity of citizenship between Whitney and each defendant, and that the amount in controversy exceeds the $75,000 jurisdictional threshold.

A. The Agreements.

The pertinent facts are both uncontested and straightforward. On October 29, 2009, defendant Point Clear executed and delivered to Whitney National Bank a Renewal Note of Note #1158, in the original principal amount of $3,000,000. (Sander Aff. (doc. 35, Exh. A), ¶ 2.) The Renewal Note specified that interest would accrue at a variable rate established by the "One Month LIBOR" rate plus 225 basis points (subject to a minimum effective rate of 4.50%);² that interest would be computed using a 360-day year; and that interest would accrue immediately and be payable on a monthly basis beginning on November 3, 2009. (Sander Aff., Exh. 1, at 1.) The Renewal Note further provided that upon default, "interest shall, to the extent permitted by law, accrue at the Default Rate. The Default Rate shall be the maximum rate authorized by applicable law, and if applicable law establishes no maximum rate, then Eighteen Percent (18%) per annum." (Id. at 1-2.)

The Renewal Note was secured by certain collateral, including mortgages on multiple pieces of real estate. (Id. at 2.) However, the Renewal Note specified that Whitney National Bank had no obligation or responsibilities with respect to the collateral, and that it possessed sole discretion as to what action (if any) to take as to the collateral in the event of default. (Id. at 2-3.)The Renewal Note also contained a fee-shifting provision, stating that "Obligor agrees to pay the reasonable fees and costs of any attorney-at-law employed by Bank to recover sums owed or to protect Bank's interests with regard to this Note." (Id. at 3.) A choice-of-law provision in the Renewal Note indicated that it would be governed by Alabama law.

The record also establishes that the four individual defendants (J. Myles Reed, Barton E. Kaiser, Thomas W. Mitchell, and Thomas E. Mitchell) signed Continuing Guaranties in Whitney National Bank's favor on October 29, 2009. Each Continuing Guaranty contained an identical provision under which the guarantor "jointly, severally, and unconditionally guarantees to Bank the prompt payment in full of all obligations and liabilities of [Point Clear Development, LLC] to Bank, direct or contingent, due or to become due, now existing or hereafter arising, ... with interest, attorneys' fees, expenses of collection and costs, and further including ... obligations to Bank on promissory notes." (Doc. 35, Exh. 2, ¶ 1.) The Guaranties further provided that the guarantors would be bound by all terms and conditions of any notes or agreements in favor of Whitney National Bank executed by Point Clear Development, LLC. (Id., ¶ 2.) The Guaranties are likewise governed by Alabama law. (Id., ¶ 9.)

B. The Merger.

As noted, both the Renewal Note and the Continuing Guaranties were executed by defendants in favor of Whitney National Bank. The named plaintiff in this action is "Whitney Bank," not "Whitney National Bank." The summary judgment record duly explains this discrepancy. In particular, the record shows that, effective June 4, 2011, Whitney National Bank merged into Hancock Bank of Louisiana, with the surviving entity being called "Whitney Bank." (Sander Aff, ¶¶ 4-6 & Exhs. 3 (at Article Five) & 4.) These facts are clearly established and undisputed. Inasmuch as the record unambiguously reflects that "Whitney Bank" is the successor by merger to Whitney National Bank, Whitney Bank is the proper plaintiff to enforce the terms of the Renewal Note and Continuing Guaranties. No defendant has suggested otherwise on summary judgment, much less developed such an argument in opposition to the pending Rule 56 motion.

C. The Breach.

By the terms of the Renewal Note, Point Clear was to repay the $3 million in principal to Whitney Bank on October 3, 2011. (Sander Aff., ¶ 9 & Exh. 1.) However, Point Clear failed to repay the principal on that date. (Sander Aff., ¶ 10.) This omission constituted a default underthe Renewal Note. (Id., Exh. 1 at 3 (listing as an event of default "the non-payment of any principal or interest on this Note on the date when due").) The Renewal Note provided that such a default triggered accrual of interest at the 18% default rate from that date forward. (Id. at 1-2.)³

Plaintiff's undisputed evidence reflects that Point Clear's unpaid principal balance on the Renewal Note at this time is $2,900,000. (Sander Aff., ¶ 12.) Plaintiff also seeks to recover interest owed under the Renewal Note, consisting of (i) regular interest accruing at the regular 4.50% rate from the date of breach through the date of default; and (ii) default interest accruing at the 18% default rate from the date of default through the date of entry of judgment in this matter.⁴ And plaintiff further claims attorney's fees and costs incurred in collecting moneys owed pursuant to the Renewal Note, in an amount which plaintiff pegs at $145,000 (or 5% of the outstanding principal).

The breach of the Renewal Note by Point Clear implicates the Continuing Guaranties, pursuant to which each of the four individual defendants unconditionally guaranteed payment to Whitney Bank of all obligations owed by Point Clear (specifically including promissory notes, interest, attorney's fees, and costs of collection). Plaintiff has made an uncontested showing thatnone of the individual defendants have made any payments of Point Clear's indebtedness to Whitney Bank under the Renewal Note. (Sander Aff., ¶ 14.)⁵

II. Summary Judgment Standard.

Summary judgment should be granted only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Rule 56(a), Fed.R.Civ.P. The party seeking summary judgment bears "the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). Once the moving party has satisfied its responsibility, the burden shifts to the non-movant to show the existence of a genuine issue of material fact. Id. "If the nonmoving party fails to make 'a sufficient showing on an essential element of her case with respect to which she has the burden of proof,' the moving party is entitled to summary judgment." Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317 (1986)) (footnote omitted). "In reviewing whether the nonmoving party has met its burden, the court must stop short of weighing the evidence and making credibility determinations of the truth of the matter. Instead, the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 999 (11th Cir. 1992) (internal citations and quotations omitted). "Summary judgment is justified only for those cases devoid of any need for factual determinations." Offshore Aviation v. Transcon Lines, Inc., 831 F.2d 1013, 1016 (11th Cir. 1987) (citation omitted).

III. Analysis.⁶

As an initial proposition, none of the defendants challenge the authenticity of the Renewal Note or the Continuing Guaranties, nor do they dispute their assent to such agreements or the non-payment of their obligations under same. In other words, all defendants appear to agree with plaintiff's position that they entered into certain agreements with Whitney National Bank and then failed to make payment when it became due.⁷ On that basis, the Court finds that Whitney Bank has proven liability as to each defendant for breach of the Renewal Note (by Point Clear) and Continuing Guaranties (by the other defendants), and that it is entitled to entry of summary judgment as to liability. The only remaining question is damages.

As to several components of damages, however, plaintiff's Rule 56 Motion is not uncontested. To the contrary, defendants Point Clear, Reed, and Barton Kaiser (the "Point Clear Defendants") oppose the Motion for Summary Judgment on the following grounds: (i) Whitney Bank failed to take reasonable steps to mitigate its damages; (ii) plaintiff's request for attorney's fees is unsupported and unreasonable; and (iii) any post-judgment interest should accrue at the statutory rate specified in 28 U.S.C. § 1961(a) rather than the default rate of interest specified in the Renewal Note. (See doc. 45.) And defendants Thomas W. Mitchell and Thomas E. Mitchell (the "Mitchell Defendants") have filed their own opposition brief, arguing that (i) the default interest rate is an uncollectable penalty under Alabama law, and (ii) the attorney's fee claim fails for insufficient proof. (See doc. 47.) The Court will consider each...