Vision Bank v. 145, LLC

• Decision Date: 04 November 2011
• Docket Number: CIVIL ACTION NO.: 10-00521-KD-B
• Parties: VISION BANK, Plaintiff, v. 145, LLC and Cynthia C. Kessler, Defendants.
• Court: U.S. District Court — Southern District of Alabama

VISION BANK, Plaintiff,

v.145, LLC and Cynthia C. Kessler, Defendants.

CIVIL ACTION NO.: 10-00521-KD-B

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

Dated: November 4, 2011

ORDER

This matter is before the Court on Plaintiff Vision Bank's Motion for Summary Judgment on Counts One and Two of its Complaint (Docs. 142-144), Defendants' Response (Doc. 159) and Vision Bank's Reply (Doc. 162); and Vision Bank's Motion for Summary Judgment on 145, LLC and Cynthia C. Kessler's Counterclaims (Docs. 147-150); Counterclaim-Plaintiffs' Response (Doc. 161); and Vision Bank's Reply (Doc. 163).

I. Procedural History

On September 22, 2010, Plaintiff Vision Bank ("Vision Bank") filed a Complaint against Defendants 145, LLC ("145") and Cynthia C. Kessler ("Kessler")¹ alleging claims for breach of contract (Count One) and guaranty obligations (Count Two). (Doc. 1). Defendant 145 and Kessler answered the Complaint on November 18, 2010 and December 15, 2010, respectively. (Docs. 26, 47). 145 asserted counterclaims against Vision Bank for breach of contract (Count One), wrongful foreclosure (Count Two) and declaratory judgment (Count Three); and Kessler asserted counterclaims against Vision Bank for wrongful foreclosure (Count One), breach of contract (Count Two) and declaratory judgment setting aside the foreclosure sale (Count Three). (Id.) On May 11, 2011, 145 amended its answer to assert counterclaims for unjust enrichment (Count Four), fraudulent suppression(Count Five), and fraudulent misrepresentation (Count Six). (Doc. 111).

II. Standard of Review

"The court shall grant summary judgment 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." Fed. R. Civ. P. 56(a). Rule 56(c) governs procedures and provides as follows:

(1) Supporting Factual Positions. A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:

(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or

(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.

(2) Objection That a Fact Is Not Supported by Admissible Evidence. A party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence.

(3) Materials Not Cited. The court need consider only the cited materials, but it may consider other materials in the record.

(4) Affidavits or Declarations. An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.

Fed. R. Civ. P. 56(c). Vision Bank, as the party seeking summary judgment, bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991) (quoting Celotex Corp. v. Catrett, 477 U.S.317, 323 (1986)). If the non-moving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323. In reviewing whether the non-moving 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 its favor. Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998-99 (11th Cir. 1992) (internal citations and quotations omitted).

III. Factual Background

The record reveals that in June 2005, Defendant 145 applied for a loan from Vision Bank to finance the purchase of certain land located in Baldwin County, Alabama: Lots 1 and 2 of Emerald Shores (beach front property in Orange Beach, Alabama). (Doc. 143-7 at 1 (Aff. Duncan at ¶2)).²

On June 10, 2005, Defendant Kessler (as well as others who are no longer defendants) executed an unlimited continuing guaranty agreement in favor of Vision Bank. (Doc. 143-7 at 5 (Aff. Duncan at ¶¶16-17); Doc. 1-5). By so doing, Kessler "jointly and severally, unconditionally and absolutely guaranteed[d] the due and punctual payment of all sums due under the Loan [to be extended to 145] the interest thereon, and any other moneys due or which may become due thereunder." (Doc. 1-5 at 1 at ¶1). In this Guaranty, Kessler expressly "waive[d]...demand for payment...non-payment at maturity and indulgences and notices of every kind[.]" (Id. at 2 at ¶4).

On June 14, 2005, Claud Clark prepared an appraisal on the property which valued same at $14.4 million. (Doc. 159-2).

On June 15, 2005, Defendant 145 executed a Loan Agreement for Acquisition Financing and a Promissory Note with Vision Bank in the amount of $8,933,000.00, which was due on January 29,2006. (Doc. 143-7 at 2 (Aff. Duncan at ¶¶4-5); Doc. 143-7 at 9-13; Doc. 1-1; Doc. 1-2). The Promissory Note was secured by a Future Advance Mortgage and Security Agreement from 145 in favor of Vision Bank, and held as collateral for the property (which was then owned in fee simple by Defendant 145). (Doc. 143-7 at 1 (Aff. Duncan at ¶19); Doc. 143-7 at 22-42). The Loan Agreement provides for notices to be sent to 145, via "145, LLC, 1000 Riverbend Boulevard, Suite A, St. Rose, LA, 70097 (Attn.: James Dalton)," with a copy to be sent to "David J. Lukinovich, 5740 Citrus Boulevard, Suite 102, Harahan, LA, 70123." (Doc. 1-1 at 12-13 at Section 6.14). The Promissory Note does not require any additional notice. (Doc. 1-2 at 4 at ¶8).

On September 9, 2008, the property was appraised at $5,000,000.00. (Doc. 159-3).

Through the years, Vision Bank and 145 repreatedly modified the Loan Agreement and Promissory Note, such that the maturity date was extended to June 28, 2010. (Docs. 1-7 through 1-15, 1-19; Doc. 143-7 at 2-5 (Aff. Duncan at ¶¶6-15); Doc. 143-2; Doc. 143-7 at 14-17).

On March 18, 2009, Kessler executed a second individual unlimited continuing guaranty, through which she "unconditionally guarantee[d] the prompt and full payment" of all of Defendant 145's "present and future...absolute and contingent...indebtedness, liabilities and obligations." (Doc. 1-17; Doc. 143-7 at 18-21). In so doing, Kessler again expressly waived notices of "presentment for payment, demand, protest, dishonor, default, and non-payment pertaining to the Indebtedness and this Guaranty." (Docs. 143-7 at 19 at ¶5).

On March 29, 2010 the property was appraised at $2,500,000.00 with a marketing period of 6-12 months. (Doc. 159-4; Doc. 143-7 at 7 (Aff. Duncan at ¶25)). On May 28, 2010, Claud Clark, III, P.C. appraised the property (for a second time) at $2,159,000.00.³ (Doc. 159-5). 145 did not satisfy the Promissory Note by its maturity date of June 28, 2010. (Doc. 143-7 at 5 (Aff. Duncan at ¶18). Specifically, according to 145 member James Dalton, "[w]e have not paid it back." (Doc. 143-3 at 2 (Dep. Dalton at 200)). Similarly, Kessler testified that she does "not have the assets or income to pay [the entirety of the debt due under the Note]." (Doc. 143-5 at 2 (Dep. Kessler at 183)). Likewise, the other members testified that they cannot repay the debt. (Doc. 143-4 at 2 (Dep. Deichman at 80); Doc. 143-6 at 2 (Dep. Lukinovich at 266)). Failure to make the payments in a timely manner constitutes an event of default under the Promissory Note. (Doc. 1-1 at 8 at Article V; Doc. 1-2 at 3 at ¶8).

On September 27, 2010, Vision Bank mailed notice of foreclosure as well as a copy of the foreclosure publication (to be published in October 2010) to 145 (to the address provided in the Loan Agreement and to its registered agent Alan M.Thames). (Doc. 143-7 at 44-45; Doc. 143-7 at 6 (Aff. Duncan at ¶¶21-22); Doc. 150-2 (Decltn. Matthews)). Notice of the foreclosure sale was published on October 1, 2010, October 8, 2010 and October 15, 2010, in The Islander (a newspaper published in Baldwin County, Alabama). (Doc. 143-7 at 5-6 (Aff. Duncan at ¶¶20-21; Doc. 143-7 at 43). A non-judicial foreclosure sale of the property was scheduled for October 22, 2010. (Id.) On October 22, 2010, the property was auctioned off at the Baldwin County Circuit Court, at which time Vision Bank was the sole bidder and purchased the property for $1.75 million. (Doc. 143-7 at 7 (Aff. Duncan at ¶24); Doc. 143-7 at 72-75).

On November 10, 2010, the property was appraised at the request of Vision Bank, by Faulkner and Associates, LLC, at $2,324,000.000 with a marketing period of 90-180 days; or $3,320,000 with a marketing period of 12-18 months. (Doc. 143-7 at 7 (Aff. Duncan at ¶26)). On July 2, 2011, Frederick H. Hall prepared a "retrospective appraisal" for counsel for Vision Bank "to be used for LitigationPurposes," valuing the property at $1.965 million on October 22, 2010, with a 9-12 month marketing period. (Doc. 150-6 (Decltn. Hall)).

IV. Discussion

Before addressing the parties' substantive contentions, the Court must first decide which state's law governs the claims and counterclaims in this diversity action between a Florida corporation (Vision Bank) and a Louisiana limited liability company comprised of members who are residents of the State of Illinois and the State of Louisiana (including Kessler) (Doc. 1 at 2).

"[A] federal court in a diversity case is required to apply the laws, including principles of conflict...