Bank of America, N.A. v. Caruk Holdings Arkansas, LLC et al
AMENDED AND SUBSTITUTED MEMORANDUM OPINION, as set forth. Signed by Honorable Jimm Larry Hendren on February 19, 2013. (lw)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
BANK OF AMERICA, N.A.
Civil No. 11-2096
CARUK HOLDINGS ARKANSAS, LLC;
DENISE L. CARUK; and
GORDON C. CARUK
AMENDED AND SUBSTITUTED
Now on this 19th day of February 2013, the Court enters this
Amended and Substituted Memorandum Opinion to take the place of
the Memorandum Opinion entered on January 7, 2013 (document #58).
In consideration of Plaintiff's Motion for Summary Judgment
Against Separate Defendants Gordon C. Caruk and Denise L. Caruk
(document #53), to which no response has been filed, the Court,
being well and sufficiently advised, finds and orders as follows:
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 that, at the time this lawsuit was
filed, the real property securing the obligation was owned by
defendant Caruk Holdings Arkansas, LLC ("Caruk Holdings") and that
separate defendants Gordon and Denise Caruk (the Caruks) were
personal guarantors of the obligation due to BANA. With the
present motion, BANA informed the Court that, on August 10, 2012,
the property was transferred from Caruk Holdings to the Caruks.
The Caruks proceed pro se in this matter, and separate
defendant, Caruk Holdings, is without representation.
On August 28, 2012, the Court entered its Memorandum
Opinion and Order (document #44) granting summary judgment against
Caruk Holdings. The Court has determined that this Order was
entered in error, as the documents filed by the parties reflect
that Caruk Holdings never assumed or guaranteed the obligation
owed to BANA.
Moreover, by transferring its interest in the property to the
Caruks, Caruk Holdings effectively extinguished any liability to
BANA. Thus, the August 28, 2012 Order is moot, and Caruk Holdings
will be dismissed from this action.
Following the entry of the above-referenced Order, BANA
notified the Court that the Caruks had filed a bankruptcy petition
in Arizona. In light of the automatic stay pending the disposition
of the bankruptcy proceedings, this case was administratively
terminated on October 9, 2012. Thereafter, BANA obtained relief
from the automatic stay, and this case was reopened on December 5,
In accordance with the Court's directives, BANA filed
the present Motion for Summary Judgment against the Caruks on
December 14, 2012. BANA seeks a judgment in rem in the amount of
$13,860.26 in accrued and unpaid interest through December 6,
2012, $561.78 in prepayment premium, and $20 in release fees),
with interest accruing at a legal rate of $14.24 per day from
December 7, 2012, to the date judgment is entered.
BANA also seeks its attorneys' fees, expenses, and other
collection costs incurred in this action, for a total amount of
resulting from the Caruks' failure to appear for their scheduled
The Caruks 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.
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).
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.
statement of the material facts it contends are not in dispute.
There being no response from the Caruks, these facts are deemed
admitted and are as follows:
On or about July 3, 2008, Stone Solutions, LLC executed
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
installments the outstanding balance of the Loan Agreement plus
interest, beginning August 3, 2008, and ending on July 3, 2023.
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."
The Loan Agreement also provides that Stone Solutions
bankruptcy petition is filed against [it], or [it] makes a general
assignment for the benefit of creditors."
The Loan Agreement also requires that Stone Solutions
"maintain [BANA] as its principal depository bank, including for
administrative deposit accounts."
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
Obligations to be due and payable immediately" and "bring an
action in any court of competent jurisdiction to foreclose."
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, as document number 7247351.
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
Part of the Northeast Quarter Southwest
Quarter of Section 5, Township 4 North, Range
(the Real Property Collateral).
transferred from Stone Solutions to Caruk Holdings by warranty
deed on November 10, 2008.
transferred from Caruk Holdings to the Caruks by warranty deed on
August 10, 2012.
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
* [Stone Solutions] fails to make any payment
or perform any obligation which arises under
* * *
* 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;
* * *
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."
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
On or about July 3, 2008, contemporaneous with the
execution of the Loan Agreement and Mortgage, Mr. Gordon C. Caruk
executed a "Continuing and Unconditional Guaranty" in favor of
Also on or about July 3, 2008, Ms. Denise L. Caruk
executed a separate "Continuing and Unconditional Guaranty" in
favor of BANA.
Pursuant to these Guaranties, the Caruks irrevocably and
unconditionally guarantee the payment and performance of Stone
Solution's obligations to BANA as and when due, whether at stated
maturity, upon acceleration, or otherwise. The Caruks' liabilities
are joint and several with each other.
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 [the Caruks] shall nonetheless be payable by [the Caruks]
immediately if requested by [BANA]."
On May 5, 2011, BANA sent a notice of default to Stone
Solutions, Caruk Holdings, Caruk Holdings Arizona, LLC, and the
Caruks at their last known addresses.
BANA immediately exercised its right to accelerate the
debt represented by the Loan Documents, as that term is defined in
petition seeking bankruptcy protection under Chapter 11 of the
United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., in the
United States Bankruptcy Court for the District of Arizona, docket
On November 20, 2012, the Arizona Bankruptcy Court
granted BANA relief from the automatic stay, finding that "[a]ll
terminated with respect to [BANA's] interest in and to the subject
Real Property located in Mansfield, Sebastian County, Arkansas."
The order also authorizes BANA to "exercise all of its remedies
under applicable non-bankruptcy law, including but not limited to
foreclosure proceedings with respect to the Real Property."
Any interest of Caruk Holdings or the Caruks in the Real
Property Collateral is inferior to the interest of BANA.
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
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;
* failing to pay taxes when due.
The Caruks have failed to dispute these allegations by
offering any proof beyond the pleadings, and they are determined
by the Court to have been established.
Based on the foregoing facts, the Court finds that
BANA's motion for summary judgment is good and that BANA is
entitled to a judgment described as follows:
As of December 14, 2012, the balance due and owing to BANA
was $86,620.52, which represents $72,178.48 in unpaid principal;
$13,860.26 in accrued and unpaid interest through December 6,
2012; $561.78 in prepayment premium; and $20.00 in release fees.
Interest at the daily rate of $14.24 has accrued on the principal
balance beginning December 7, 2012, through the date of the
judgment entered herewith, for a total of $1,068.00.
The obligation to BANA is secured by mortgage from Stone
Solutions, a predecessor in title to the Caruks, and guaranteed by
the Caruks personally. Any interest the Caruks hold in the Real
Property Collateral is inferior to the interest of BANA. Judgment
will be entered accordingly.
If the judgment to be entered herewith is 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
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.
The Court further notes that both the Loan Agreement and
Mortgage provide for the collection of "reasonable costs and
enforcement of the agreement, and the Court finds that BANA is so
BANA has submitted the affidavit of its attorney Diana
Borgognoni Snyder, which includes itemized statements of the
attorneys' fees and expenses it claims. BANA seeks a judgment of
contends is reasonable considering that this was one of five
related loans in Arizona and Arkansas; that the Caruks are in
bankruptcy; that the Caruks have been unrepresented by counsel for
negotiations, among other things.
In light of the circumstances of this case, the Court finds
the amount requested to be reasonable and will grant a judgment of
attorneys' fees and expenses for $65,729.80 in rem against the
Real Property Collateral.
IT IS THEREFORE ORDERED that Plaintiff's Motion for Summary
Judgment Against Separate Defendants Gordon C. Caruk and Denise L.
Caruk (document #53) is hereby granted. Judgment shall be entered
by the Court under separate order.
IT IS FURTHER ORDERED that, in light of Caruk Holdings'
transfer of the Real Property Collateral to the Caruks, the
Court's August 28, 2012 Memorandum Opinion and Order (document
#44) is moot, and Caruk Holdings is hereby dismissed from this
IT IS SO ORDERED.
/s/ Jimm Larry Hendren
JIMM LARRY HENDREN
UNITED STATES DISTRICT JUDGE
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