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Whitney Bank v. Nafel

United States District Court, M.D. Louisiana

March 30, 2015

WHITNEY BANK,
v.
BASSAM NAFEL, ESLAM MAHMOUD, AND CENTURY SURETY COMPANY

ORDER

JOHN W. dEGRAVELLES, District Judge.

Before the Court is Plaintiff Whitney Bank's Motion for Summary Judgment. (Doc. 10.) Defendant has filed an Opposition (Doc. 16), to which Plaintiff has replied (Doc. 17). No oral argument is necessary.

After carefully considering the law, facts in the record, and arguments of the parties, the Court grants in part and denies in part Whitney Bank's Motion for Summary Judgment. (Doc. 14-2.)

I. Facts and Procedural History

A. Agreements Between the Parties

1. The Promissory Notes

Whitney Bank loaned money to Defendant, Bassam Nafel, on two different occasions. (Doc. 14-2, p. 3.) On May 11, 2011, Nafel executed a promissory note in the original, maximum principal amount of $125, 000 (hereinafter, the "$125, 000 note"). (Doc. 14-4, pp. 1-2.) On August 31, 2010, Nafel executed a promissory note in the original, maximum principal amount of $200, 000 (hereinafter, the "$200, 000 note"). (Doc. 14-4, pp. 3-4.)

2. The Donmmoor Property

On June 1, 2010, Defendant Nafel and Defendant Eslam Mahmoud, as Mortgagors, Defendant Nafel as borrower, and Whitney Bank as Mortgagee, entered into a Multiple Indebtedness Mortgage (hereianfter the "Donmoor Mortgage"). (Doc. 14-2, p. 5.) To secure all indebtedness owed by Nafel and Mahmoud to Whitney Bank, including the $125, 000 note and the $200, 000 note, Nafel and Mahmoud specifically mortgaged, affected and hypothecated in favor of Whitney Bank all of their present and future rights, title, and interest in and to property located at 1140 North Donmoor Avenue, Baton Rouge, Louisiana (hereinafter, "the Donmore property").

In an Assignment of Leases and Rents (hereinafter, the "Donmoor Assignment") executed on the same day, Nafel and Mahmoud pledged, assigned, and granted to Whitney Bank a continuing security interest in all leases and rents of the Donmoor Property to secure all present and future indebtedness owed by Nafel and/or Mahmoud to Whitney Bank. (Doc. 14-2, p. 6; Doc. 14-8.) The Donmoor Assignment contains a provision under which failure to make certain monthly payments when due under the indebtedness owed to Whitney Bank, including the $125, 000 note and the $200, 000 note, constitutes an event of default. (Doc. 14-2, p. 6; Doc. 14-8.)

The Donmoor Assignment also granted the following specific rights to Whitney Bank: "to accelerate the maturity of and to declare any and all Indebtedness then owed to Lender to be immediately due and payable, " "to notify individual lessees, sublessees, and/or obligors under such obligations to pay such proceeds and payments directly to Lender, " "to file suit, either in its own name or in the name of the Grantor, to enforce any obligations and/or collect any and all such proceeds and payments that may in future be due and owing under the Property, " "to attach any deposit accounts in which such proceeds or payments were deposited, whether or not such proceeds or payments were commingled with other funds of Grantor, and whether or not such proceeds or payments then remain on deposit in such an account, " and "subject to any mandatory requirements under applicable Louisiana law, to sell or otherwise dispose of and deliver the property...at private or public sale." (Doc. 14-2, pp. 6-7, quoting Doc. 14-8.)

On June 1, 2010, Nafel and Mahmoud, as Grantors, and Whitney Bank, as Lender, entered into a commercial security agreement (hereinafter, the "First Security Agreement"). (Doc. 14-2, p. 9, citing Doc. 14-9.) Nafel and Mahmoud granted to Whitney Bank a continuing security interest in the Assignment of Leases and Rents on the Donmoor Property, to secure all indebtedness owed by Nafel and Mahmoud to Whitney Bank in any way and under any agreement, including the $125, 000 note and the $200, 000 note, with principal, interests, costs, expenses, attorney's fees, and other fees and charges. (Doc. 14-2, p. 9, citing Doc. 14-9.) The First Security Agreement contains a provision by which failure by Nafel and/or Mahmoud to make monthly payments when due under any agreement with Whitney Bank constitutes an event of default under the First Security Agreement. (Doc. 14-2, p. 9, citing Doc. 14-9.) In the event of default, Nafel and Mahmoud agreed to pay, upon demand, all of Whitney Bank's costs and expenses, including reasonable attorneys' fees incurred in connection with the enforcement of the security agreement, in an amount not exceeding 25% of the principal balance due on the indebtedness. (Doc. 14-2, pp. 9-10, citing Doc. 14-9.)

3. The Stern Property

On August 31, 2010, Nafel and Mahmoud, as Mortgagors, Nafel as Borrower, and Whitney Bank as Mortgagee, entered into a Multiple Indebtedness Mortgage (hereinafter, the "Stern Mortgage"). (Doc. 14-2, p. 7; Doc. 14-7.) To secure all indebtedness owed by Nafel and Mahmoud to Whitney Bank, including the $125, 000 note and the $200, 000 note, Nafel and Mahmoud each specifically mortgaged, affected and hypothecated unto and in favor of Whitney Bank any and all of their present and future rights, title and interest in and to property located at 8282 Stern Avenue, Baton Rouge, Louisiana (hereinafter, the "Stern Property"). The Stern Mortgage provides that Whitney Bank shall have the right to, at its sole option, accelerate the maturity and demand immediate payment in full of all indebtedness, and to commence appropriate foreclosure proceedings against the Stern Property and against Mortgagor's Rights as provided in the Mortgage. (Doc. 14-2, p. 8, citing Doc. 14-7.)

An Assignment of Leases and Rents was also executed on August 31, 2010 (hereinafter, the "Stern Assignment"). (Doc. 14-2, p. 8; Doc. 14-8.) Therein, Nafel pledged, assigned and granted to Whitney Bank a continuing security interest in all leases and rents of the Stern Property, to secure all present and future indebtedness owed by Nafel to Whitney Bank. (Doc. 14-2, p. 8, citing Doc. 14-8.) Nafel's failure to make certain monthly payments when due under the indebtedness owed to Whitney Bank, including the $125, 000 note and the $200, 000 note, constitutes an event of default under the assignment. (Doc. 14-2, p. 8, citing Doc. 14-8.)

On August 31, 2010, Nafel and Mahmoud, as Grantors, and Whitney Bank, as Lender, also entered into a commercial security agreement (the "Second Security Agreement") under which Nafel granted to Whitney Bank a continuing security interest in the Assignment of Leases and Rents on the Stern Property, to secure all Indebtedness owed by Nafel and Mahmoud to Whitney Bank in any way and under any agreement, including the $125, 000 note and the $200, 000 note. (Doc. 14-2, p. 10, citing Doc. 14-10.) Failure by Nafel to make certain monthly payments when due under any agreement with Whitney Bank constitutes an event of default under the Second Security Agreement. (Doc. 14-2, p. 10, citing Doc. 14-10.) Defendants agreed to pay, upon demand, all of Whitney Bank's costs and expenses, including reasonable attorneys' fees incurred in connection with the enforcement of the Second Security Agreement, in an amount not to exceed 25% of the principal balance due on the indebtedness. (Doc. 14-2, pp. 10-11, citing Doc. 14-10.)

4. Default

Both promissory notes contain the following cross-default provision:

DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:
***
Other Defaults in Favor of Lender. Should Borrower or any guarantor of this Note default under any other loan, extension of credit, security right, instrument, document, or agreement or obligation in favor of Lender. (Doc. 14-4, p. 1, 3.)

Under this cross-default provision, if the borrower is found to be in default on any loan, he is automatically put into default on all loans, including the $125, 000 note, the $200, 000 note, the Donmoor Mortgage, the Stern Mortgage, the Donmoor Assignment, the Stern Assignment, the First Security Agreement, and the Second Security Agreement. (Doc. 14-4, p. 1, p. 3.)

5. The Stern Property Fire

Following the execution of the notes, the Stern Property was damaged by fire. Under the Stern Mortgage, after a damaging event such as a fire, Whitney Bank expressly has the "right to receive the proceeds of all insurance protecting the Property." (Doc. 14-2, p. 7, quoting Doc. 14-7.) The Stern Mortgage provides, "[a]ll insurance proceeds may be applied, at [Whitney Bank's] sole option and discretion...for the purpose of (1) repairing or restoring the lost, damaged, or destroyed property; or (2) reducing the then outstanding balance of the Indebtedness." (Doc. 14-2, p. 7, quoting Doc. 14-7.)

B. Default by Nafel

Whitney Bank claims that Nafel has defaulted under all agreements. (Doc. 14-2, p. 2.) Whitney Bank claims that Mahmoud solidarily joined with Nafel to grant the Donmoor Mortgage, the Stern Mortgage, the Donmoor Assignment, and the First Security Agreement. (Doc. 14-2, p. 2.) Accordingly, Whitney Bank made amicable demand on Nafel and Mahmoud, but claims that Nafel and Mahmoud have failed to pay the amounts past-due and owing under the promissory notes and other agreements. (Doc. 14-2, p. 2.) Whitney Bank claims it is also entitled to recover all proceeds of insurance paid to Nafel following the fire at the Stern Property. (Doc. 14-2, p. 2.)

Whitney Bank claims it sent demand letters to Nafel on September 12, 17, and 18, 2013, placing Nafel in default and exercising its right to accelerate the amounts due under the $125, 000 note, making all amounts due under the $125, 000 note immediately due and payable. (Doc. 14-2, p. 11.) Whitney Bank claims it sent demand letters to Nafel on September 12 and 17, 2013, placing Nafel in default on the $200, 000 note, exercising its right to accelerate the amounts due under the $200, 000 note, and making all amounts under the $200, 000 note immediately due and payable. (Doc. 14-2, p. 11.) Whitney Bank claims that Defendants have not yet paid the amount owed. (Doc. 14-2, p. 11.)

On February 19, 2014, Whitney Bank filed this suit against Nafel and Mahmoud in the 19th Judicial District Court of Louisiana. (Doc. 14-2, p. 3.) Century Surety Company was originally made a defendant to this suit but was later dismissed. (Doc. 14-2, p. 3.) Prior to its dismissal, Century Surety Company removed this suit to this Court. (Doc. 14-2, p. 3.)

Whitney Bank claims that, in the event of a default by Nafel and/or Mahmoud, it has the right to declare formally the promissory note to be in default, to accelerate the maturity, and to insist upon immediate payment in full of the unpaid principal balance then outstanding under the Promissory Notes, plus the accrued interest, together with reasonable attorneys' fees, costs, expenses and other fees and charges provided in the agreements. (Doc. 14-2, p. 4.)

Whitney Bank argues that it is entitled to the total amount due under both of the Promissory Notes as of April 29, 2014, which it asserts equals $319, 793.22, consisting of $306, 447.82 in principal, accrued interest through April 29, 2014 of $11, 776.59, interest continuing to accrue from April 30, 2014 on the amounts outstanding at 18% per annum until paid, late charges of $518.81, other charges in connection with the enforcement of $1, 050.00, plus reasonable attorneys' fees, not to exceed 25% of the principal balance due on each of the notes referenced above, and all costs of these proceedings. (Doc. 14-2, p. 5.)

Whitney Bank also believes it is entitled to a declaration recognizing that (1) the Donmoor Mortgage and the Stern Mortgage secure all Indebtedness owed to Nafel and Mahmoud to Whitney Bank, (2) that Whitney Bank has a first ranking mortgage on the Donmoor Property and the Stern Property, (3) that Whitney Bank and its designated representatives are entitled to exercise all rights to foreclosure upon, seize, and sell the Donmoor Property and the Stern Property, and (4) Whtiney Bank's remaining rights as set forth in the Donmoor Mortgage and Stern Mortgage. (Doc. 14-2, p. 12.)

Whitney Bank also argues that in addition to the above, pursuant to the Assignment of Leases and Rents on the Donmoor Property, the Assignment of Leases and Rents on the Stern Property, the First Security Agreement and the Second Security Agreement, it is entitled to a declaration that Whitney Bank has a right to and security interest in the leases and rents on the Donmoor Property and the Stern Property, for all indebtedness owed to Whitney Bank by Nafel and/or Mahmoud. (Doc. 14-2, p. 12.) Whitney Bank seeks an order directing that all lease payments made with respect to the Donmoor Property and the Stern Property be paid directly to Whitney Bank, until all indebtedness owed to Whitney Bank by Nafel and/or Mahmoud is paid in full. (Doc. 14-2, pp. 12-13.)

Finally, Whitney Bank argues that, pursuant to the Stern Mortgage and the Second Security Agreement, Whitney Bank is the agent and attorney-in-fact for Nafel and Mahmoud, coupled with an interest to make, settle, and adjust claims under the insurance policy covering the Stern Property. (Doc. 14-2, p. 13.) Whitney Bank argues that it has the express right to all proceeds paid and to be paid due to the fire damage to the Stern Property, including the $20, 000 that Century Surety Company previously paid to Nafel. (Doc. 14-2, p. 13.) Whitney Bank believes that it is entitled to a declaration by the Court that it has a right to receive all proceeds from property damage insurance on the Stern Property, not to exceed the balance of all amounts owed to it by Nafel and Mahmoud. (Doc. 14-2, p. 13.)

II. Law and Argument

A. Summary Judgment Standard

"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). If the mover bears his burden of showing that there is no genuine issue of fact, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts... [T]he nonmoving party must come forward with specific facts showing that there is a genuine issue for trial.'" See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)(internal citations omitted). The non-mover's burden is not satisfied by "conclusory allegations, by unsubstantiated assertions, or by only a scintilla' of evidence." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (citations and internal ...


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