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Bellwether Enterprise Real Estate Capital v. Jaye

United States District Court, E.D. Louisiana

December 11, 2019

BELLWETHER ENTERPRISE REAL ESTATE CAPITAL
v.
CHRISTOPHER JAYE, ET AL.

         SECTION “F”

          ORDER AND REASONS

          MARTIN L. C. FELDMAN, UNITED STATES DISTRICT JUDGE.

         Before the Court is Bellwether Enterprise Real Estate Capital's Rule 12(b)(6) motion to dismiss the counterclaims of Christopher Jaye and Kristi Morgan. For the reasons that follow, the motion is GRANTED, in part, as to Jaye and Morgan's standalone claim for attorney's fees, and DENIED, in part, as to all other claims.

         Background

         This contract dispute arises from a project to build affordable housing in New Orleans East.

         Christopher Jaye and Kristi Morgan own a real estate development company called Mirus New Orleans. That company owns the Village of Versailles project - the first affordable housing development built in New Orleans East since Hurricane Katrina.

         To fund the project, Jaye, Morgan, and Mirus obtained a commercial mortgage loan from Bellwether. The loan is insured by the United States Department of Housing and Urban Development (HUD) and memorialized in a mortgage note and a building loan agreement. Under the building loan agreement, Bellwether agreed to advance the final loan proceeds upon HUD's final endorsement of the mortgage note for insurance.

         As a condition of the loan, Jaye, Morgan, and Mirus entered into an extension fee agreement. The agreement required each to pay Bellwether a monthly “extension fee” if final endorsement did not occur by August 31, 2018:

1. Extension Fees. (a) Obligor agrees that in the event that Final Endorsement has not occurred on or before August 31, 2018, Obligor shall be liable and obligated to pay to Lender a monthly extension fee (the “Extension Fee”) equal to (i) 1/8th of one percent (0.125%) of the original face amount of the FHA Mortgage Note for each “monthly Period” (as defined below) or portion thereof, commencing on September 1, 2018 and continuing through November 31, 2018 then increasing to (ii) 1/4th of one percent (0.25%) of the original face amount of the FHA Mortgage Note for each Monthly Period or portion thereof, commencing on December 1, 2018 and continuing until Final Endorsement. In the event that Final Endorsement shall not theretofore have occurred, Obligor shall be obligated to pay each such monthly Extension Fee in advance, fifteen (15) days prior to the commencement of the applicable Monthly Period; provided that Lender shall refund the last such monthly Extension Fee to Obligor in the event that Final Endorsement shall occur prior to the commencement of the applicable Monthly Period. Thereafter, there shall be no refund of the monthly Extension Fee. As used herein [sic] “Monthly Period” shall mean a period starting on the first day of a month and ending on the last day of that month.

         Final endorsement did not follow; litigation did. In September 2018, the contractor on the project, Broadmoor, LLC, pointed to missed payments and sued Mirus, Bellwether, and others. See Civil Action No. 18-9064. The suit settled in March 2019, and final endorsement occurred around the same time.

         Two months later, Bellwether sued Jaye and Morgan for breaching the extension fee agreement.[2] Bellwether says Jaye and Morgan owe it over $360, 000 in unpaid extension fees and interest. Jaye and Morgan responded with counterclaims.

         Jaye and Morgan counterclaimed against Bellwether for breach of contract and a declaratory judgment that the extension fee agreement is unenforceable. They also assert a stand-alone claim for attorney's fees “as provided by” the extension fee agreement.

         As for the breach-of-contract counterclaim, Jaye and Morgan say Bellwether breached implied obligations arising from the extension fee agreement by “unreasonably and wrongfully delay[ing]” final endorsement. They say they gave Bellwether everything it needed to proceed to final endorsement by August 31, 2018, but Bellwether failed to do so.

         As for the declaratory-judgment counterclaim, Jaye and Morgan say the extension fee agreement is unenforceable because it provides for “liquidated penalty damages" that are “manifestly unreasonable.” They add that Bellwether failed to place them in default, a prerequisite for recovering stipulated damages under Louisiana law.

         The attorney-fee counterclaim is unadorned. Jaye and Morgan merely allege that they “are entitled to recover” attorney's fees “as provided by the parties' agreement and under Louisiana law.”

         Now, Bellwether moves to dismiss under Rule 12(b)(6). It first contends that the breach-of-contract counterclaim fails because Jaye and Morgan do not identify a contractual duty it breached. It next contends that the declaratory-judgment counterclaim fails because Jaye and Morgan fail to allege facts showing that the extension fee agreement is unenforceable. It finally contends that the attorney-fee counterclaim fails because the extension fee agreement does not contain a provision allowing Jaye and Morgan to recover attorney's fees.

         I.

         A complaint must contain a short and plain statement of the claim showing that the pleader is entitled to relief. Fed.R.Civ.P. 8(a)(2). A party may move for dismissal of a complaint that fails this requirement. See Fed.R.Civ.P. 12(b)(6). Such motions are rarely granted because they are viewed with disfavor. Leal v. McHugh, 731 F.3d 405, 410 (5th Cir. 2013) (quoting Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011)).

         In considering a Rule 12(b)(6) motion, the Court “accept[s] all well-pleaded facts as true and view[s] all facts in the light most favorable to the plaintiff.” Thompson v. City of Waco, Tex., 764 F.3d 500, 502 (5th Cir. 2014) (citing Doe ex rel. Magee v. Covington Cty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854 (5th Cir. 2012) (en banc)). Conclusory allegations are not well pleaded and, consequently, are not accepted as true. See Thompson, 764 F.3d at 502-03 (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

         To overcome a Rule 12(b)(6) motion, “‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Iqbal, 556 U.S. at 678). A claim is facially plausible if it contains “factual content that allows the court to draw the ...


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