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Cadlerock III, LLC v. Cobalt Partners, LLC

United States District Court, S.D. Georgia, Savannah Division

March 13, 2017



         Presently before the Court is Plaintiff s renewed motion for summary judgment.[1] (Doc. 137.) The Clerk of Court gave Defendants timely notice of the summary judgment motion and the summary judgment rules, of the right to file affidavits or other materials in opposition, and the consequences of default. (Doc.138.) Therefore, the notice requirements of Griffith v. Wainwright, 772 F.2d 822, 825 (11th Cir. 1985) (per curiam), have been satisfied. Defendants Alvarez, Beeler, Cook, and Tuttle filed response briefs, and Plaintiff filed a reply brief.[2](Docs. 140, 141, 143, 144.) The time for filing materials in opposition has expired, and the motion is ripe for consideration. Upon consideration of the record evidence, relevant law, and the parties' respective briefs, Plaintiff's motion is GRANTED IN PART, DENIED IN PART.

         I. BACKGROUND

         On January 3, 2008, in exchange for a loan to form a bank in Coral Gables, Florida, Defendant Cobalt Partners, LLC, ("Cobalt") executed a promissory note in favor of First National Bank of Savannah, Georgia, ("FNB") in the principal amount of $1, 000, 000.00.[3] (Roberts Decl., Doc. 89-1, ¶ 2; Wheaton Aff., Doc. 128-7, Ex. 1.) According to Plaintiff, as part of this financing arrangement, Cobalt's members - Messrs. Allen Harper and Michael Kistler as well as Defendants Alvarez, Beeler, Cook, Tuttle, and Werk - each then executed an absolute, unconditional, continuing unlimited personal guaranty of the note.[4] (Roberts Decl. ¶ 3; Wheaton Aff., Exs. 3-7; Kistler Dep., Doc. 89-8, at 21:4-25.) On January 20, 2009, Defendant Cobalt renewed the note.[5] (Roberts Decl. ¶ 5; Wheaton Aff., Ex. 2.)

         Having failed to make full payment by the renewed note's maturity date of July 20, 2009, Defendant Cobalt defaulted thereon and the other Defendants did not fulfill their purported guaranties. (Roberts Decl. ¶¶ 6-7.) Nevertheless, on September 16, 2009, after forcing an advance of funds from Mr. Kistler's separate line of credit with FNB ("Kistler's LOC") and applying those funds to satisfy the amounts then-due under the renewed note, FNB treated the renewed note as paid in full.[6] (Id. ¶¶ 8-9 & Ex. 8; see also Docs. 89-2, 111-3.) FNB considered the renewed note paid off until May 27, 2010, when FNB reinstated the renewed note as it existed prior to FNB having advanced funds from Kistler's LOC on September 16, 2009.[7] (Roberts Decl. ¶ 9; see also Docs. 89-2, 111-3.)

         Without payment for the renewed note, the Federal Deposit Insurance Corporation ("FDIC-R"), appointed as FNB's receiver on June 25, 2010, ultimately filed this action against Defendants on April 19, 2013, alleging that Defendant Cobalt and the other named Defendants were jointly and severally liable for the notes' outstanding principal, interest, and other amounts due thereon.[8] (Compl., Doc. 1; Roberts Decl. ¶ 10; see also Saville Decl., Doc. 128-6, ¶¶ 2-3.) The Clerk of this Court subsequently entered default against Defendants Cobalt and Werk for their respective failures to appear, plead or otherwise defend against this action after having been properly served. (Docs. 43, 93; see also Docs. 13, 42, 79, 92.)

         On July 1, 2015 the FDIOR filed its original motion for summary judgment. (Doc. 89.) Just as Defendants began filing their responses to that motion, Plaintiff Cadlerock III, LLC acquired the FDIC-R's interest in the notes and the relevant guaranties and subsequently replaced the FDIC-R in this suit. (Docs. 105, 108.) On November 11, 2015, Plaintiff submitted the unsworn declaration of its account officer, Nick Davies, who attested that the rights to the notes and the relevant guaranties were transferred from the FDIC-R to The Cadle Company II, Inc. ("Cadle") and then from Cadle to Plaintiff on August 27, 2015. (Davies 11/11/2015 Decl., Doc. 121-2, ¶¶ 1-7 & Exs. 1-4; see also Davies 05/18/2016 Decl., Doc. 128-5, ¶¶ 2-3; Wheaton Aff., Exs. 1-7.) On March 28, 2016, the Court denied Plaintiff's original motion for summary judgment.[9] (Doc. 124.) On May 18, 2016, Plaintiff filed a motion seeking leave to file its present renewed motion for summary judgment, [10] which the Court subsequently granted. (Docs. 128, 136.)


         A. Summary Judgment Standard

         Plaintiff's motion for summary judgment will be granted only if "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). In this context, facts are "material" if they could affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) . In evaluating the contentions of the parties, the Court must view the facts in the light most favorable to the non-moving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986), and must draw "all justifiable inferences in [its] favor, " United States v. Four Parcels of Real Prop., 941 F.2d 1428, 1437 (11th Cir. 1991) (en banc) (internal punctuation and citations omitted).

         Initially, the moving party bears the burden and must show the Court, by reference to materials on file, the basis for the motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). How to carry this burden depends on who bears the burden of proof at trial. Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993) . When the movant has the burden of proof at trial, "that party must show affirmatively the absence of a genuine issue of material fact: it must support its motion with credible evidence . . . that would entitle it to a directed verdict if not controverted at trial." Id. (internal quotation marks and citation omitted) . Put another way, the moving party must show that no reasonable jury could find for the non-moving party on any of the essential elements of the case. Id.

         If - and only if - the movant carries its initial burden, the non-movant may avoid summary judgment by coming forward "with significant, probative evidence demonstrating the existence of a triable issue of fact." Fitzpatrick, 2 F.3d at 1116 (internal quotation marks and citation omitted). After the introduction of the non-movant's evidence, summary judgment will be granted for the moving party only if "the combined body of evidence is still such that the movant would be entitled to a directed verdict at trial - that is, such that no reasonable jury could find for the non-movant." Id. Importantly, however, the non-movant cannot carry its burden by relying on the pleadings or by making conclusory statements. See Morris v. Ross, 663 F.2d 1032, 1033-34 (11th Cir. 1981). Instead, the non-movant must respond with affidavits or as otherwise provided by Federal Rule of Civil Procedure 56.

         B. Applicable Law

         As noted in the Court's Order on Plaintiff's original motion for summary judgment, the choice of law rules and the substantive law of Georgia apply in this case. (See Doc. 124, at 5-7.) The choice of law rules of the forum state (here, Georgia) apply when deciding state law claims. Benchmark Med.Holdings, Inc. v. Rehab Solutions, LLC, 307 F.Supp.2d 1249, 1258-59 (N.D. Ala. 2004) (citing Boardman Petroleum, Inc. v. Federated Mut. Ins. Co., 135 F.3d 750, 752 (11th Cir. 1998)). Because the notes each specifically state that "[t]he law of the state of Georgia will govern this note, " (Wheaton Aff., Exs. 1- 2), Georgia law governs those instruments. See Neibert v.Computer Scis. Corp., 621 F.App'x 585, 589 (11th Cir. 2015)("Absent a contrary public policy, [Georgia courts] will normally enforce a contractual choice of law clause." (quoting Carr v. Kupfer, 250 Ga. 106, 107 (Ga. 1982))). Because the guaranties indicate that the applicable city is Savannah, Georgia and that the lending institution is FNB, [11] (Doc. 128-7, Exs. 3-7), Georgia substantive law appears to govern those instruments. Convergys v. Keener, 582 S.E.2d 84, 86-87 n.l (Ga.2003) (holding that Georgia continues to follow the traditional rule of lexi loci contractus, whereby contracts are governed "by the law of the place where they were made, except where it appears from the contract itself that it is to be performed in a State other than that in which it was made, in which case the laws of that sister State will be applied." (internal quotation marks, citations, and formatting omitted)); but see Neibert, 621 F.App'x at 589. Because Plaintiff has not renewed its prior arguments that the laws of another state should be applied to the guaranties, [12] the Court will apply the background rule of lexi loci contractus and, consequently, Georgia substantive law for those instruments as well.


         "In a suit to enforce a promissory note, a plaintiff establishes a prima facie case by producing the note and showing that it was executed." L.D.F. Family Farm, Inc. v. Charterbank, 756 S.E.2d 593, 596 (Ga.Ct.App. 2014). "Once that prima facie case has been made, the plaintiff is entitled to judgment as a matter of law unless the defendant can establish a defense." Id. (internal quotation marks and citation omitted).

         "Similarly, in a suit on a personal guaranty, when the signature is admitted or established, production of the instrument entitles the holder to recover on it unless the defendant establishes a defense."[13] Id.

         A. Defendants ...

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