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Magnolia Financial Group v. Antos

United States District Court, E.D. Louisiana

February 27, 2018

MAGNOLIA FINANCIAL GROUP
v.
KENNETH ANTOS, ET AL

         SECTION “H”

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE.

         Before the Court are two Motions for Summary Judgment, one filed by Magnolia Financial Group, LLC (“Magnolia”) (Doc. 274), and another by Twin Towers Trading Site Management, LLC (“Twin Towers”) (Doc. 290). For the following reasons, both Motions are DENIED.

         BACKGROUND

         This suit involves two promissory notes with outstanding amounts due, as well as the proceeds of a settlement agreement that were pledged as collateral for those notes. The undisputed facts before the Court on the Motions for Summary Judgment are as follows. On November 11, 2013, Defendants KCI Investments, LLC (“KCI”), Kenneth Antos, and David Becklean (collectively, the “Lead Defendants”) executed a Secured Promissory Note (the “First Note”) with Magnolia for the principal sum of $2, 000, 000 with an interest rate of 15% per annum. In addition, Becklean executed a Pledge and Security Agreement (the “Security Agreement”) in favor of Magnolia wherein Becklean pledged his interest in the proceeds of a settlement agreement as collateral for the First Note. Under the settlement agreement, Becklean was to receive 48 monthly payments of $103, 500 from Twin Towers Trading Site Management, LLC (“Twin Towers”) beginning in September 2012. Subsequently, on January 13, 2015, the Lead Defendants entered into a second agreement to borrow an additional $100, 000 from Magnolia (the “Second Note”). This Court has already determined that the Notes and Pledge and Security Agreement are valid and enforceable.[1]

         Magnolia asserts that, in agreeing to loan money to the Lead Defendants through the Notes, it relied in part on a letter from Donald Porges stating that he was authorized by Becklean to make payments to Magnolia from the settlement agreement in the event of default on the Notes.[2] Donald Porges is a member and manager of Twin Towers, and practices accounting through his professional corporation, Porges & Eisenberg CPA, LLC (“P&E”).

         The Lead Defendants defaulted on the Notes on or before October 21, 2015 by failing to make the required payments.[3] Magnolia notified the Lead Defendants of their default in October of 2015, and then on October 27, 2015, notified Twin Towers of Becklean's default in an effort to foreclose on Becklean's interest in the Twin Towers settlement. Magnolia initially provided Twin Towers with a Notice of Foreclosure on Security Interest that identified the debt that was in default and demanded that Twin Towers forward proceeds under the settlement agreement to Magnolia pursuant to the Security Agreement.[4] Twin Towers informed Magnolia that it would not forward such payments until it received a court order acknowledging Magolia's right to the collateral.[5] Twin Towers states that Becklean informed Twin Towers that he was not in default on the Notes.[6] Afterwards, Magnolia provided Twin Towers with copies of the underlying Security Agreement and First Note.[7] Unsatisfied, Twin Towers continued to make payments under the Security Agreement to Becklean through July of 2016.

         On November 20, 2015, Magolia filed the instant suit against the Lead Defendants seeking a declaratory judgment recognizing its rights under the Notes and the Security Agreement.

         On August 5, 2016, Twin Towers intervened in this action with an interpleader complaint and deposited the final payment due to Becklean under the settlement agreement into the registry of the Court. The interpleader complaint names Magnolia and Becklean as claimants, and additionally seeks a judgment that Twin Towers has discharged all liability under the settlement agreement. Magnolia answered and brought cross claims against, inter alia, Twin Towers, Donald Porges, and P&E (collectively the “Porges Defendants”) for tortious interference with contractual relations, fraud, bad faith breach of conventional obligation, negligent breach of contract, negligent misrepresentation, and general negligence for failing to make payments to Magnolia following the notice of foreclosure.[8]

         Magnolia now moves for summary judgment against Twin Towers, seeking a judgment that Twin Towers owes Magnolia the nine monthly payments under the Security Agreement that Twin Towers paid to Becklean after Magnolia demanded that Twin Towers forward the payments to Magnolia, a total of $931, 500. Magnolia also requests that the Court find that its attorney's fees and costs associated with the collection of the collateral “are awardable” pursuant to the Security Agreement. Twin Towers opposes the Motion, arguing that it was entitled to continue to pay Becklean because Magnolia never produced a court order proving that Magnolia was due the funds.

         Twin Towers separately moves for summary judgment on its interpleader complaint finding that Twin Towers has discharged all of its liability as to the $4, 968, 000 due to Becklean under the settlement agreement. Magnolia opposes the Motion, arguing that Twin Towers could not discharge its obligation under the settlement agreement by paying Becklean after Twin Towers received notice of foreclosure.

         LEGAL STANDARD

         Summary judgment is appropriate if “the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations. . ., admissions, interrogatory answers, or other materials” “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[9] A genuine issue of fact exists only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[10]

         In determining whether the movant is entitled to summary judgment, the Court views facts in the light most favorable to the non-movant and draws all reasonable inferences in his favor.[11] “If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial.”[12] Summary judgment is appropriate if the non-movant “fails to make a showing sufficient to establish the existence of an element essential to that party's case.”[13] “In response to a properly supported motion for summary judgment, the nonmovant must identify specific evidence in the record and articulate the manner in which that evidence supports that party's claim, and such evidence must be sufficient to sustain a finding in favor of the nonmovant on all issues as to which the nonmovant would bear the burden of proof at trial.”[14] The Court does “not . . . in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.”[15] Additionally, “[t]he mere argued existence of a factual dispute will not defeat an otherwise properly supported motion.”[16]

         LAW AND ANALYSIS

         Both Magnolia's and Twin Towers' Motions for Summary Judgment turn on the same issue, whether Twin Towers could discharge its obligation to make payments to Becklean under the settlement agreement by paying Becklean, rather than Magnolia, after Magnolia gave Twin Towers notice of Becklean's default and assignment of the settlement agreement proceeds.[17]

         Louisiana's implementation of Uniform Commercial Code Article 9 allows, in the event of default, a secured party to notify an account debtor to make payment to the secured party.[18] Louisiana Revised Statutes ยง 10:9-406 details the procedure for such a ...


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