Royal Alice Props., LLC v. AMAG, Inc. (In re Royal Alice Props., LLC)
| Decision Date | 25 November 2020 |
| Docket Number | Adversary No. 19-01133,Bankr. No. 19-12337 |
| Citation | 625 B.R. 146 |
| Parties | IN RE ROYAL ALICE PROPERTIES, LLC, Debtor. Royal Alice Properties, LLC, Plaintiff, v. AMAG, Inc., Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Louisiana |
Leo D. Congeni, Congeni Law Firm, LLC, New Orleans, LA, for Debtor.
John F. Kurtz, Boise, ID, John F. Kurtz, Jr., Kurtz Law PLLC, Boise, ID, Richard W. Martinez, Richard W. Martinez, APLC, Metairie, LA, for Defendant.
In September 2019, Royal Alice Properties, LLC (the "Debtor" or, prepetition, "Royal Alice") initiated the above-captioned adversary proceeding against AMAG, Inc. ("AMAG") to determine the extent, validity, and priority of AMAG's lien asserted on properties owned by the Debtor located at 900–902, 906, and 910–912 Royal Street in New Orleans, Louisiana (the "Property"). In its Complaint, the Debtor asserts that (i) the Interest1 and Default Interest on the balance owed under the Secured Promissory Note (the "Note") and the Loan Agreement (the "Loan Agreement"), both dated July 31, 2013 (together, the "Loan Docs"),2 is usurious and must be forfeited under applicable Louisiana law; (ii) the balance of $4.6 million claimed to be owed under the Loan Docs by AMAG (the "Loan Balance") should be discounted by $366,250.00, plus interest, representing the purchase price for a sale of worthless stock required by AMAG as a condition of executing the Loan Docs, a transaction which is null under applicable Louisiana law; and (iii) the Loan Balance should be credited in the amount of $392,779.75 (the "Foreclosure Credit"), representing the proceeds paid to Palm Finance Corporation ("Palm"), an affiliate of AMAG, upon the foreclosure sale of the Los Angeles home of Peter Hoffman, a guarantor of the Note and other debts owed to Palm. [ECF Doc. 1]. AMAG filed an Answer denying those allegations. [ECF Doc. 13].
In August 2020, AMAG and the Debtor filed cross-motions for summary judgment. Therefore, the Court considers here (i) AMAG's Motion for Summary Judgment and accompanying memorandum and affidavits in support, [ECF Docs. 51, 52, 81 & 88], which the Debtor opposed, [ECF Doc. 82], and AMAG's reply brief in support of its motion, [ECF Doc. 85]; and (ii) the Debtor's motion for summary judgment and accompanying memorandum in support, [ECF Docs. 56 & 59], which AMAG opposed, [ECF Doc. 78], and the Debtor's reply brief in support of its motion, [ECF Doc. 89]. AMAG and the Debtor submitted statements of uncontested facts, [ECF Docs. 53 & 59, respectively]. AMAG also filed Objections and Motion To Strike Paragraphs of the Supplemental Declaration of Peter M. Hoffman in Opposition to Defendant AMAG Inc's Motion for Summary Judgment ("Motion To Strike"), [ECF Doc. 86], to which the Debtor filed a response, [ECF Doc. 90], and AMAG filed a reply, [ECF Doc. 91]. Finally, the Debtor filed a request for this Court to take judicial notice of certain documents filed in the property records of Los Angeles County, California (the "Judicial Notice Motion"), [ECF Doc. 58], which is unopposed.
For the following reasons, this Court (i) GRANTS summary judgment in favor of AMAG; (ii) DENIES summary judgment to the Debtor; (iii) GRANTS IN PART AND DENIES IN PART the Motion To Strike; and (iv) GRANTS the Judicial Notice Motion.3
The Debtor is a Louisiana limited liability company that holds three real estate properties in the French Quarter neighborhood in New Orleans, Louisiana: (a) 900–902 Royal Street; (b) 906 Royal Street, Unit E; and (c) 910–912 Royal Street, Unit C. [No. 19-12337, ECF Doc. 2]. All three properties secure repayment of an obligation owed to AMAG, discussed herein. [ECF Doc. 3]. The Debtor's income derives solely from leasing its three properties.
On July 31, 2013, AMAG and Susan Hoffman, individually and as the Managing Member of Royal Alice, executed the Loan Docs. . Under the Loan Docs, AMAG agreed to acquire the outstanding balance of loans totaling $1,860,901.60 owed by Susan and Peter Hoffman to Whitney Bank and the mortgages securing that debt, and also agreed to make "Additional Advances" to Susan Hoffman and Royal Alice in the principal amount of $3,166,000.00 (the "Loan"). See Loan Agreement, ¶ 1; Frcek Decl. ¶ 7 & Ex. 3.4 Those "Additional Advances," as defined in the Loan Agreement, consisted of funds advanced by AMAG that were to be used by the Hoffmans to accomplish three purposes:
See Loan Agreement, ¶ 1. In exchange, the joint and several "Borrowers," Susan Hoffman and Royal Alice, agreed to repay the principal amount owed under the Loan Docs by the "Maturity Date" of July 13, 2016, plus 10% interest per annum for the first year and 12% interest for the last two years. See Loan Agreement, ¶ 3; Note, at 1. In the event of default, the interest rate provided for in the Note would increase to 18% per annum until the Borrowers cured the default. See Loan Agreement, ¶ 3; Note, ¶ 3.
As one among other conditions of funding, Peter Hoffman executed a Continuing Personal Guaranty of repayment of the debt owed pursuant to the Loan Docs. See Loan Agreement, ¶¶ 1–2; Note, ¶ 8. As expressly stated in the Loan Agreement: "Borrowers warrant and represent that the Loan will be used exclusively for business and commercial purposes and is not being used for personal or household purposes." Loan Agreement, ¶ 1. Finally, the parties agreed that the Loan Agreement "shall in all respects be governed by and construed in accordance with the laws of Louisiana applicable to agreements executed and to be wholly performed within Louisiana." Loan Agreement, ¶ 11.
On August 29, 2019, Royal Alice filed a petition for bankruptcy relief under chapter 11 of the Bankruptcy Code. [No. 19-12337, ECF Doc. 1]. According to the Debtor, it "filed for relief under the Bankruptcy Code to stay an imminent foreclosure on its Real Estate Assets filed by AMAG." [No. 19-12337, ECF Doc. 147, at 10–11]. AMAG filed a proof of claim against the Debtor's estate, alleging a secured claim in the amount of $4,623,618.26, exclusive of post-petition interest, fees, and costs. [No. 19-12337, Proof of Claim No. 2]. On September 23, 2019, the Debtor initiated the above-captioned adversary proceeding challenging the amount owed to AMAG, leading to the cross-motions for summary judgment the Court considers here.
This Court has jurisdiction over this proceeding under 28 U.S.C. § 1334(a) and the Order of Reference of the District Court dated April 11, 1990. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (K) & (O).
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). Rule 7056 of the Federal Rules of Bankruptcy Procedure incorporates Rule 56(a) in adversary proceedings. "A party seeking summary judgment must demonstrate the absence of a genuine dispute of material fact by establishing the absence of evidence supporting an essential element of the non-movant's case." Northshore Offshore Grp., LLC v. A&B Valve & Piping Sys., LLC (In re Northshore Offshore Grp., LLC) , Adv. No. 17-3406, 2018 WL 5880949, at *2 (Bankr. S.D. Tex. Nov. 5, 2018) (citing Sossamon v. Lone Star State of Tex ., 560 F.3d 316, 326 (5th Cir. 2009) ). "The standard of review is not merely whether there is a sufficient factual dispute to permit the case to go forward, but whether a rational trier of fact could find for the non-moving party based upon evidence before the court." James v. Sadler , 909 F.2d 834, 837 (5th Cir. 1990) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp ., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).
Questions of contractual interpretation constitute legal, not factual, disputes which can be adjudicated in a motion for summary judgment. See Reliant Energy Servs., Inc. v. Enron Can. Corp ., 349 F.3d 816, 821 (5th Cir. 2003) (). "In cases involving the interpretation of a contract, summary judgment is only appropriate where the language of the contract is unambiguous." In re Northshore Offshore Grp., LLC , 2018 WL 5880949, at *2 (citing Nowak v. Ironworkers Local 6 Pension Fund , 81 F.3d 1182, 1192 (2d Cir. 1996) ; Cooper Indus., LLC v. Precision Castparts Corp ., No. H-15-0576, 2016 WL 4939565, at *6 (S.D. Tex. Sept. 14, 2016) ).
In deciding a motion for summary judgment, "the judge's function is not [herself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc ., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In so doing, the Court views the facts and evidence in the light most favorable to the non-moving party at all times. See Campo v. Allstate Ins. Co ., 562 F.3d 751, 754 (5th Cir. 2009). A party asserting that a fact cannot be or is genuinely disputed must support that assertion by citing to particular parts of materials in the record, showing that the materials cited do not establish the presence or absence of a genuine dispute, or showing that an...
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