Comerica Bank v. Mann

Decision Date17 September 2013
Docket NumberCivil No. 1:11–CV–467–AT.
Citation13 F.Supp.3d 1262
PartiesCOMERICA BANK, Plaintiff/Counter Defendant, v. Charles H. MANN, III, Defendant/Counter Claimant.
CourtU.S. District Court — Northern District of Georgia

Steven D. Ginsburg, Duane Morris, LLP, Atlanta, GA, for Plaintiff/Counter Defendant.

Albert Newell Remler, Remler Tillman Law Group, P.C., Lawrenceville, GA, Grace Marie Tillman, Richard C. Wayne & Associates, P.C., Atlanta, GA, for Defendant/Counter Claimant.


AMY TOTENBER, United States District Judge.

This is a deficiency action by Plaintiff, Comerica Bank (Comerica) against Defendant Charles H. Mann, III (Mann) for damages based upon Plaintiff's enforcement of a written security guaranty and for related contractual attorney's fees and other expenses. The Court previously granted in part and denied in part Plaintiff's motion for summary judgment in this case, granting summary judgment as to Defendant's liability under the guaranty and denying summary judgment as to Plaintiff's claim for damages. The parties' mortgage contract required a bench trial in this case. The case was tried before the Court sitting without a jury beginning on January 14, 2013 and continuing through January 17, 2013. It is now before the Court on the parties' Proposed Findings of Fact and Conclusions of Law and Defendant's Motion for Judgment as a Matter of Law [Doc. 93].1

Having considered the testimony and evidence introduced, the Court makes the following findings of fact and conclusions of law.

I. Procedural History

Comerica filed its Complaint in this case on February 16, 2011, seeking a deficiency judgment against Mann following liquidation of collateral. (Compl.) Comerica sued Mann on a guaranty, claiming that Mann had guaranteed Yacht Ventures, Ltd.'s (“Yacht Ventures”) obligations under a promissory note. (Compl. ¶ 21.)

On February 12, 2012, Comerica filed its Motion for Summary Judgment. (Mot. Summ. J.) In its Motion, Comerica argued on the basis of Georgia law that Mann owed the difference between the sale price of the collateral and the amount of Comerica's loan to Yacht Ventures. (Id. at 6–8.) In response, Mann pointed out that the Guaranty, under which he was being sued, clearly provided that Florida law controls, and that Comerica failed to comply with the notice and mitigation requirements of Florida law before disposing of the collateral. (Resp. Mot. Summ. J. at 7 n. 2, 11–12.) In its reply brief, Comerica implicitly acknowledged that Florida law applies here by engaging with Mann's arguments about the requirements of Florida law for disposition of collateral. (Reply Mot. Summ. J. at 3.)

On June 5, 2012, the Court entered an Order granting in part and denying in part Comerica's Motion for Summary Judgment. (Doc. 62.) The Court granted the Motion with respect to Comerica's claim that Mann is liable for default under the guaranty, but denied the Motion with respect to Comerica's claim for entry of a deficiency judgment, holding that there was a genuine question of material fact regarding whether Comerica disposed of the collateral in a commercially reasonable manner. (Id. at 15.)

Following an unsuccessful mediation, the Court conducted a four-day bench trial from January 14–17, 2013.

II. General Introduction and Governing Legal Standards

This case arises out of a $3,750,000.00 loan Comerica made to Yacht Ventures in June 2008 to refinance the purchase of an 82–foot luxury sport yacht named the Louise.2 Yacht Ventures was a Cayman Islands company, of which Defendant Mann was the sole principal. Mann personally guaranteed the loan.

The Louise experienced a number of technical problems throughout its short life as a charter vessel for Yacht Ventures. Ultimately, unable to secure enough charter business, Yacht Ventures notified Comerica of its intention to stop making its mortgage payments. In November 2008, Yacht Ventures missed its first payment, and Comerica notified Yacht Ventures that it was accelerating the payments due on the promissory note. Comerica also wrote that it reserved the right to pursue all its remedies under the mortgage and deed of covenants.

For the next several months, Comerica arranged for the docking of the Louise at Roscioli Yachting Center in Fort Lauderdale, Florida. Following a December 2008 marine survey to determine the Louise's value, Comerica attempted to persuade the Danish manufacturer to take back or repair the Louise. The manufacturer refused to oblige.

In April 2009, Comerica liquidated a $250,000.00 Certificate of Deposit (“CD”) Mann had provided to guarantee the loan to Yacht Ventures. In May 2009, Comerica notified Mann's attorney that it was electing to exercise its remedies under the mortgage and deed of covenants and that it was taking possession of the Louise. In June 2009, Comerica commissioned another independent marine survey to determine the Louise's value. The June 2009 survey by Kelly Marine Surveyors, Inc. identified the value of the boat at $3,275,000.00 whereas the December 2008 survey by Patton Marine, Inc. identified the value as $4,500,000.00. Both surveys considered the costs of any technical repairs required in their assessments of value. In July 2009, Comerica executed a listing agreement with the sales arm of Roscioli to market and sell the Louise at list price for $3.5 million. In December 2010, Comerica sold the Louise for $1,400,000.00.

The parties' dispute is over whether Comerica sold the Louise in a commercially reasonable manner as required under Florida law.

A. Choice of Law

“A federal court in a diversity case is required to apply the laws, including principles of conflict of laws, of the state in which the federal court sits.” Colonial Life & Accident Ins. Co. v. Hartford Fire Ins. Co., 358 F.3d 1306, 1308 (11th Cir.2004) ; see also Frank Briscoe Co. v. Ga. Sprinkler Co., 713 F.2d 1500, 1503 (11th Cir.1983). In Georgia, parties by contract may stipulate that the laws of another jurisdiction will govern the transaction.” Rayle Tech, Inc. v. DeKalb Swine Breeders, Inc., 133 F.3d 1405, 1409 (11th Cir.1998).

The parties stipulated in Mann's Guaranty that the Guaranty would be governed, construed, and interpreted in accordance with the laws of the State of Florida. (Guaranty ¶ 14.) However, Comerica suggests in its Proposed Findings of Fact and Conclusions of Law that Cayman law applies here, because the Mortgage and Deed of Covenants states that it is to be governed and construed in accordance with the laws of the Cayman Islands.3 (Comerica's Proposed Findings of Fact and Conclusions of Law (“Comerica's FOF”) at 35; see also Deed of Covenants art. IV ¶ 4.) Comerica contends that the Mortgage and Deed of Covenants' choice of law provision governs here because this case is about the requirements of a sale under that document. Comerica is mistaken. The controversy in this case is over Mr. Mann's deficiency liability under the Guaranty. Comerica made this point clear in its Complaint. (Compl. at 5 (stating that the action was a suit on Mann's guarantee on behalf of Yacht Ventures).) It also took the same position—that Florida law governed—in its motion for summary judgment and pretrial order submission. (See Doc. 61 at 2–13 (relying exclusively on Florida law); Doc. 66 at 14–16 (citing exclusively to Florida law as providing relevant law and authority in this case).) Only at this late juncture has Comerica changed its position. (Comerica's FOF at 35–37.) As the dispute at issue arises here under the Guaranty, the Court finds that Florida law applies and Cayman law is inapplicable.

B. Mann's Deficiency Liability

Under Article 9 of the Uniform Commercial Code (UCC), as codified in Fla. Stat. Ann. § 679.609(1), a secured party may take possession of collateral after a default by the debtor. The secured party may then “sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing.” Fla. Stat. Ann. § 679.610(1). “However, if the secured party wishes to preserve its right to seek a deficiency judgment, the secured party is not at liberty to dispose of the repossessed collateral in any manner it wants.” S. Developers & Earthmoving, Inc. v. Caterpillar Fin. Servs. Corp., 56 So.3d 56, 60 (Fla.Dist.Ct.App.2011). Instead, [e]very aspect of [the] disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable.”Fl. Stat. Ann. § 679.610(2). The purpose of this statutory requirement is ‘to protect the debtor, because [it] help[s] prevent the creditor from acquiring the collateral at less than its true value or unfairly understating its value so as to obtain an excessive deficiency judgment.’ Burley v. Gelco Corp., 976 So.2d 97, 100 (Fla.Dist.Ct.App.5th 2008) (quoting Allen v. Coates, 661 So.2d 879, 884 (Fla.Dist.Ct.App.1st 1995) ).

In order to establish entitlement to a deficiency judgment in a certain amount, the secured party must show that its disposition of the collateral was (1) commercially reasonable and (2) resulted in the recovery of an amount less than the amount of the secured debt. Caterpillar, 56 So.3d at 60 ; Burley, 976 So.2d at 101. If the debtor places the commercial reasonableness of the disposition of collateral at issue, the burden falls to the secured party to establish that every aspect of the disposition was commercially reasonable. See Fla. Stat. Ann. § 679.626(2) ; see also Caterpillar, 56 So.3d at 60 ; Weiner, 482 So.2d at 1364–65 ; Burley, 976 So.2d at 100. The secured party's failure to dispose of the collateral in a commercially reasonable manner should not impose a burden upon the debtor to prove damages. Weiner, 482 So.2d at 1364. If the Court determines that “the secured party has disposed of collateral in a commercially unreasonable manner, there will arise a presumption that the fair market value of the collateral at the time of repossession was equal to the amount of...

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