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Bank of Ruston v. Cardwell

United States District Court, E.D. Louisiana

September 28, 2018

BANK OF RUSTON
v.
RONALD RAY CARDWELL, ET AL.

         SECTION: “J” (1)

          ORDER AND REASONS

          CARL J. BARBIER, UNITED STATES DISTRICT JUDGE.

         Before the Court are two Motions for Summary Judgment (R. Docs. 18, 30) filed by Plaintiff, Bank of Ruston (“the Bank”). Defendant, United States of America (“Federal Defendant”), opposes both motions (R. Docs. 22, 31). The Bank filed replies (R. Docs. 25, 34). Having considered the motions and legal memoranda, the record, and the applicable law, the Court finds that pursuant to Federal Rule of Civil Procedure 56(f), the Bank's motions should be DENIED and that summary judgment in favor of Federal Defendant should be GRANTED.[1]

         FACTS AND PROCEDURAL BACKGROUND

         This litigation derives from the purported sale of 565 Lotus Drive, North, in Mandeville, Louisiana (“the Property”) on August 17, 2012, from the Justin Patrick Cardwell and Jordan Canterbury Cardwell Testamentary Trust (“the Trust”) to Ronald Ray Cardwell (“Trustee Cardwell” or “Cardwell”) and his wife, Debra.

         On August 25, 2005, Cardwell was indicted for Mail Fraud and Bank Fraud and conspiracy to commit same with his wife against First National Bank in Ruston. (R. Doc. 22, at 2-3). Cardwell pleaded guilty to one count of Bank Fraud. (R. Doc. 22, at 3). On December 5, 2006, he was sentenced to serve jail time and make restitution to First National Bank in the principal amount of $162, 440.78. (R. Doc. 22, at 3). On April 27, 2007, the United States recorded the judgment as a lien against Cardwell in the mortgage and conveyance records of St. Tammany Parish. (R. Doc. 22, at 3). On March 16, 2007, the United States Attorney's Office for the Western District of Louisiana obtained a judgment against Cardwell, individually, in the amount of $162, 440.78 for restitution pursuant to the Anti-Terrorism and Effective Death Penalty Act of 1963. (R. Doc. 18-1, at 4).

         While Cardwell's criminal proceedings were underway, his father, Pat Ray Cardwell, established a testamentary trust in favor of his grandsons, Justin Patrick Cardwell and Jordan Canterbury Cardwell (“Justin” and “Jordan”), and named Ronald Ray Cardwell as the trustee. (R. Doc. 18-1, at 3). The Trust became effective upon Pat Ray Cardwell's death on April 30, 2007. (R. Doc. 18-1, at 3). Cardwell is the sole trustee and Justin and Jordan are the sole income and principal beneficiaries of the Trust. (R. Doc. 18-1, at 3).

         On September 10, 2007, the Trust acquired the Property from Cecil A. Collins and Sharon L. Collins. (See R. Doc. 18-4). Bank of Ruston (“the Bank”) loaned the Trust $244, 115.03 to finance the purchase.[2] (R. Doc. 18-1, at 3). The loan was secured by a mortgage in favor of the Bank and encumbering the Property, and Cardwell signed a promissory note in his capacity as trustee. (R. Doc. 18-1, at 3-4). The mortgage was recorded with the Clerk of Court of St. Tammany Parish on September 11, 2007. (R. Doc. 18-1, at 4).

         On June 23, 2009, the IRS levied a federal tax lien against Cardwell, individually, in the principal amount of $19, 011.00 (“the IRS Lien”). (R. Doc. 18-1, at 4). On July 27, 2010, Asset Acceptance, L.L.C. (“Asset”) obtained a judgment against Cardwell, individually, in the principal amount of $6, 133.43, plus interest, costs, and attorney's fees (“the Asset Lien”). (R. Doc. 18-1, at 4).

         On August 17, 2012, Trustee Cardwell purported to sell the Property from the Trust to himself and his wife, Debra. (See R. Doc. 18-9). The act of sale was recorded in the conveyance records of St. Tammany Parish the same day. (R. Doc. 22, at 4). The Bank's mortgage prohibited the Trust from transferring the Property without the Bank's consent, but the Bank did not consent to the transfer. (R. Doc. 18-1, at 4).

         On April 16, 2016, the Bank filed suit against Cardwell in the Twenty Second Judicial District Court of Louisiana to enforce the mortgage on the Property. (R. Doc. 18-1, at 1). On July 21, 2016, the court rendered judgment in favor of the Bank against the Trust in the amount of $91, 470.62, plus 25 percent attorney's fees, contract interest of 12 percent per annum from the date of judicial demand until judgment, and legal interest therein from the date of judgment until paid and all costs of those proceedings. (R. Doc. 18-1, at 1-2). A writ of fifa was issued for the seizure of the Property, and a sale to satisfy the Bank's judgment was set to be held on January 18, 2017. (R. Doc. 18-1, at 2). However, before the sale could occur, the Sheriff notified counsel for the Bank that Cardwell had individually purchased the Property from the Trust on August 17, 2012. (R. Doc. 18-1, at 2). Additionally, individual judgment creditors of Cardwell-including Federal Defendant and Asset- were identified as holding secured interests in the Property, impeding the Bank's ability to have the Property sold to satisfy the judgment against the Trust. (R. Doc. 18-1, at 2).

         Thereafter, the Bank filed the above-captioned matter in the Twenty Second Judicial District Court of Louisiana against Cardwell (in his individual capacity and as trustee of the Trust), Debra Canterbury Cardwell, Federal Defendant, and Asset, seeking to annul the August 17, 2012 sale (“the Sale”) of the Property by the Trust to Cardwell. (R. Doc. 18-1, at 2). Federal Defendant removed the case to federal court. (R. Doc. 1).

         On June 13, 2018, the Bank filed a Rule 56 Motion for Summary Judgment seeking a declaration that the Sale is null and void. (See R. Doc. 18). Federal Defendant opposed the motion (See R. Doc. 22), and the Bank filed a reply (See R. Doc. 25). On August 28, 2018, the Bank filed a Rule 56 Motion for Summary Judgment seeking summary judgment on alternative grounds. (See R. Doc. 30). Specifically, if this Court determines that the Sale is not a nullity, the Bank asks that this Court rule that the Bank's mortgage is the superior security interest on the Property. (See R. Doc. 30). Federal Defendant opposed the motion (See R. Doc. 31), and the Bank filed a reply (See R. Doc. 34).

         LEGAL STANDARD

         Summary judgment is appropriate when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed.R.Civ.P. 56); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a dispute as to any material fact exists, a court considers “all of the evidence in the record but refrains from making credibility determinations or weighing the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but a party cannot defeat summary judgment with conclusory allegations or unsubstantiated assertions. Little, 37 F.3d at 1075. A court ultimately must be satisfied that “a reasonable jury could not return a verdict for the nonmoving party.” Delta, 530 F.3d at 399.

         If the dispositive issue is one on which the moving party will bear the burden of proof at trial, the moving party “must come forward with evidence which would ‘entitle it to a directed verdict if the evidence went uncontroverted at trial.'” Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991). The nonmoving party can then defeat the motion by either countering with sufficient evidence of its own, or “showing that the moving party's evidence is so sheer that it may not persuade the reasonable fact-finder to return a verdict in favor of the moving party.” Id. at 1265.

         If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record is insufficient with respect to an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue for trial. See, e.g., id. at 325; Little, 37 F.3d at 1075.

         PARTIES' ...


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