Bank of America, N.A. v. Caruk Holdings Arkansas, LLC et al

Filing 44

MEMORANDUM OPINION AND ORDER granting 38 Motion for Summary Judgment. Judgment will be entered by the Court under separate order within (20) days of the date of this Order. Signed by Honorable Jimm Larry Hendren on August 28, 2012. (lw)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
BANK OF AMERICA, N.A.
v.

PLAINTIFF
Civil No. 11-2096

CARUK HOLDINGS ARKANSAS, LLC;
DENISE L. CARUK; and
GORDON C. CARUK

DEFENDANTS

MEMORANDUM OPINION AND ORDER
Now

on

this

28th

day

of

August,

2012,

comes

on

for

consideration plaintiff Bank of America, N.A.’s Motion for Default
Judgment or, Alternatively, Summary Judgment Against Defendant
Caruk Holdings Arkansas, LLC (document #38), to which no response
has been filed. The Court, being well and sufficiently advised,
finds and orders as follows:
1.

Plaintiff Bank of America, N.A. (BANA) filed this action

on May 27, 2011, seeking judgment on a financial obligation and
the foreclosure of a lien on real property securing the obligation
upon failure of defendants to pay the judgment.
The

pleadings

indicate

the

real

property

securing

the

obligation is owned by defendant, Caruk Holdings Arkansas, LLC
("Caruk Holdings") and that separate defendants, Gordon and Denise
Caruk (Caruks or Mr. and/or Mrs. Caruk) are personal guarantors of
the obligation due BANA, which is secured by the real property at
issue.
2.

The Caruks proceed pro se in this matter, and separate

defendant, Caruk Holdings, is without representation.
3.

On August 1, 2012, BANA filed the present motion seeking

a default judgment against separate defendant, Caruk Holdings,
based on its inability to participate in the litigation due to
lack of representation. Alternatively, BANA seeks summary judgment
against separate defendant Caruk Holdings.
Thus, the narrow questions presented by the motion under
consideration are whether the Court should grant BANA either a
default judgment or summary judgment against Caruk Holdings; and,
if either, what——exactly——should any such judgment contain?
4.

Caruk Holdings has failed to file a response to the

motion, and the time for responding has now passed. The Court has
received no motions to extend the time for filing a response.
5.

The Court has considered and rejected the notion that a

default judgment should be entered against Caruk Holdings. First,
the docket shows that, after entry of a Clerk's Default against
Caruk Holdings, the Court set it aside and permitted Caruk
Holdings additional time to answer BANA's complaint (See document
#18). Caruk Holdings——through counsel——then filed an Amended
Answer (document #19) on or about August 18, 2011. Although
counsel

for

Caruk

Holdings

later

was

permitted

to

withdraw

(document #22), there is no indication in the record that the
Amended Answer which had been filed on behalf of Caruk Holdings
has been withdrawn or stricken. Thus, Caruk Holdings remains a

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litigant before the Court. Second, although the entry of a default
judgment against Caruk Holdings might be justified in light of its
failure to appear and defend, such a remedy is harsh and not
preferred——especially where, as here, it would appear that summary
judgment may well be appropriate.
6.

The Court will, therefore, turn to a consideration of

BANA's motion for summary judgment as against Caruk Holdings.
Summary judgment is appropriate where there is no genuine
dispute as to any material fact and the moving party is entitled
to judgment as a matter of law. Fed. R. Civ. P.56(a). Once the
moving party has satisfied its initial burden of identifying those
portions

of

the

pleadings,

discovery,

and

affidavits

which

demonstrate the absence of a genuine issue of material fact, the
nonmoving party must go beyond the pleadings and, by its own
affidavits or discovery, set out specific facts showing a genuine
issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). If the nonmoving party fails to do so, the moving party is
entitled to judgment as a matter of law. Id.
UNDISPUTED FACTS
7.

As required by Local Rule 56.1, BANA has filed a

statement of the material facts it contends are not in dispute.
There being no response from Caruk Holdings, these facts are
deemed admitted and are as follows:
(a)

On or about July 3, 2008, Stone Solutions, LLC executed

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a Real Estate Loan Agreement in favor of BANA. The original
principal amount of the Loan Agreement was $80,000, bearing
interest at a rate of 7.100% per annum. Under the terms of the
Loan

Agreement,

Stone

Solutions

promised

to

pay

in

monthly

installments the outstanding balance of the Loan Agreement plus
interest, beginning August 3, 2008, and ending on July 3, 2023.
(b)

The Loan Agreement provides that Stone Solutions will be

in default if, among other things,
* it “fails to make a payment . . . when due;”
* “[a]ny default occurs under any other agreement [Stone
Solutions] has with [BANA] or any affiliate;” or
* “[a] default occurs under any other term or condition
of [the] Agreement.”
(c)
will

be

The Loan Agreement also provides that Stone Solutions
in

default

if

it

“files

a

bankruptcy

petition,

a

bankruptcy petition is filed against [it], or [it] makes a general
assignment for the benefit of creditors.”
(d)

The Loan Agreement also requires that Stone Solutions

“maintain [BANA] as its principal depository bank, including for
the

maintenance

of

business,

cash

management,

operating

and

administrative deposit accounts.”
(e)

Upon default, BANA is entitled to invoke any “rights and

remedies authorized by law.” This specifically includes, but is
not limited to, the right to “declare any or all of the Secured

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Obligations to be due and payable immediately” and “bring an
action in any court of competent jurisdiction to foreclose.”
(f)

Simultaneously with the execution of the Loan Agreement

and to secure its payment, Stone Solutions executed and delivered
to BANA a “Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing.” The Mortgage was filed for record in Sebastian
County, Arkansas, on July 16, 2008.
(g)

Pursuant to the Mortgage, Stone Solutions granted to

BANA an interest in specific real property located in Mansfield,
Sebastian County, Arkansas, and is more particularly described as
follows:
Part of the Northeast Quarter Southwest
Quarter of Section 5, Township 4 North, Range
31 West,
Greenwood
District,
Sebastian
County, Arkansas
(the Real Property Collateral).
(h)

The

Mortgage

provides

that

any

of

the

constitute an “Event of Default:”
* [Stone Solutions] fails to make any
payment, when due, under the [Loan Agreement]
(after giving effect to any applicable grace
period), or any other default occurs under
and as defined in the [Loan Agreement] or in
any other instrument or agreement evidencing
any of the Secured Obligations and such
default continues beyond any applicable cure
period;
* [Stone Solutions] fails to make any payment
or perform any obligation which arises under
this Mortgage;
* * *
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following

* Any representation or warranty made in
connection with this Mortgage or the Secured
Obligations proves to have been false or
misleading in any material respect when made;
* Any default occurs under any other mortgage
on all or any part of the Property, or under
any obligation secured by such mortgage,
whether such mortgage is prior to or
subordinate to this Mortgage;
* * *
(i)

The Mortgage also provides that Stone Solutions “shall

pay prior delinquency all taxes, levies, charges and assessments,
including assessments on appurtenant water stock, imposed by any
public or quasi-public authority or utility company which are (or
if not paid, may become) a lien on all or part of the Property or
any interest in it, or which may cause any decrease in the value
of the Property or any part of it.”
(j)

The Mortgage further provides that upon the occurrence

of an Event of Default, BANA “may declare any or all of the
Secured Obligations to be due and payable immediately” and “in
person, by agent or by court-appointed receiver, may enter, take
possession of, manage and operate all or any part of the Property,
and in its own name or in the names of Mortgagor, sue for or
otherwise collect any and all Rents, including those that are past
due, and may also do any and all other things in connection with
those actions that Mortgagee may in its sole discretion consider
necessary

and

appropriate

to

protect

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the

security

of

this

Mortgage.”
(k)

On or about July 3, 2008, contemporaneous with the

execution of the Loan Agreement and Mortgage, Mr. Caruk executed
a “Continuing and Unconditional Guaranty” in favor of BANA.
(l)

Also on or about July 3, 2008, Ms. Caruk executed a

separate “Continuing and Unconditional Guaranty” in favor of BANA.
(m)

Pursuant

irrevocably

and

to

these

Guaranties,

unconditionally

Mr.

guarantee

and

the

Ms.

Caruk

payment

and

performance of Stone Solution’s obligations to BANA as and when
due, whether at stated maturity , upon acceleration, or otherwise.
Mr. and Ms. Caruk’s liabilities are joint and several with each
other.
(n)

The

Guaranties

provide

that

“[i]n

the

event

that

acceleration of time for payment of any of the Indebtedness is
stayed upon the insolvency, bankruptcy, or reorganization of
[Stone Solutions] or otherwise, all such Indebtedness guaranteed
by [Mr. and Ms. Caruk] shall nonetheless be payable by [Mr. and
Ms. Caruk] immediately if requested by [BANA].”
(o)

On November 10, 2008, Stone Solutions transferred the

Real Property Collateral to Caruk Holdings by warranty deed.
(p)

On May 5, 2011, BANA sent a notice of default to Stone

Solutions, Caruk Holdings, Caruk Holdings Arizona, LLC, and Mr.
and Ms. Caruk at their last known addresses.
(q)

BANA immediately exercised its right to accelerate the

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debt represented by the Loan Documents, as that term is defined in
the Complaint.
Although

not

stated

expressly

in

BANA’s

statement

of

undisputed facts, the following facts are set out in the Complaint
and further support BANA’s motion:
(r)
of

the

As of April 20, 2011, the balance due and owing to BANA
obligation

Caruks——was

of

$88,429.20,

Caruk

Holdings——as

representing

guaranteed

the unpaid

by

principal

the
of

$74,178.48; accrued and unpaid interest of $5,149.64; prepayment
penalty of $1,745.35; and $7,355.73 in accrued and unpaid fees as
provided in the pertinent loan documents. Interest continues to
accrue on the obligation at the per diem rate of $14.629 for April
20, 2011, and each day thereafter until the date of the judgment
to be pursuant to this Order. BANA is also entitled to an award of
attorneys' fees and costs pursuant to the loan documents and as
authorized by applicable law.
(s)

The said obligation to BANA is secured by mortgage from

Caruk Holdings’ predecessor in title (Stone Solutions) to BANA on
the Real Property Collateral and any interest of Caruk Holdings in
the same is inferior to the interest of BANA.
(t)

If the judgment to be entered herein be not paid within

ten (10) days after its entry, BANA is entitled to an order of
foreclosure on its said mortgage with the right to have it sold by
judicial sale to satisfy the said judgment. Any such sale proceeds

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shall

be

first

applied

to

the

costs

of

sale——including

a

Commissioner's fee to the Commissioner appointed by the Court to
sell the real property collateral; then to the payment of BANA's
judgment; and any remaining proceeds shall then be deposited into
the registry of this Court to be distributed pursuant to further
orders of the Court.
DISCUSSION
8.

The undisputed facts and the documents presented with

BANA’s pleadings show:
*

that the obligation due BANA——as evidenced by the Loan

Agreement and other documentation——is in default;
*

that BANA holds a valid first lien on the Real Property

Collateral given by Caruk Holdings to secure the payment of the
said obligation;
*

that BANA has the right to foreclose its lien on the

Real Property Collateral if the obligation is not faithfully paid
or the obligation otherwise is in default; and
*

that BANA has satisfactorily shown that Stone Solutions

(the obligor) has defaulted on the Loan Agreement by
*

failing to make payments when due;

*

transferring the Real Property Collateral;

* failing to use BANA as its principal depository bank;
and
*

failing to pay taxes when due.

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Caruk Holdings has failed to dispute these allegations by
offering any proof beyond the pleadings, and they are determined
by the Court to have been established.
9.

Based on the foregoing facts, the Court finds that

BANA’s motion for summary judgment is good; that BANA is entitled
to a judgment as described in this Order; and that it is further
entitled to an order of foreclosure against the Real Property
Collateral if the judgment be not paid.
10.

The

Court

notes

that

BANA

has

not

sought

summary

judgment against either Mr. Caruk or Mrs. Caruk. In light of this
Order and the perceived postures of the Caruks in this litigation,
the Court deems it appropriate to direct BANA to seek such
judgment against Caruks within ten (10) days of this Order.
IT IS THEREFORE ORDERED that BANA’s motion for summary
judgment against separate defendant Caruk Holdings Arkansas, LLC
(document #38) is hereby granted. Judgment shall be entered by the
Court under separate order within twenty (20) days of the date of
this Order.
IT IS SO ORDERED.
/s/ Jimm Larry Hendren
JIMM LARRY HENDREN
UNITED STATES DISTRICT JUDGE

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