The Cadle Company II, Inc. v. Menchion et al
Filing
123
ORDER AND OPINION granting Defendants The Best Service Co., Inc., Padrica Menchion and Kenneth Menchions Motion for Summary Judgment 107 and granting in part and denying in part the Plaintiffs Motion for Summary Judgment 108 . Signed by Judge Thomas W. Thrash, Jr on 12/2/15. (ddm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
THE CADLE COMPANY II, INC.,
Plaintiff,
v.
CIVIL ACTION FILE
NO. 1:14-CV-1418-TWT
KENNETH MENCHION, et al.,
Defendants.
OPINION AND ORDER
This is an action seeking to recover on a home equity line of credit. It is before
the Court on the Defendants The Best Service Co., Inc., Padrica Menchion and
Kenneth Menchion’s Motion for Summary Judgment [Doc. 107] and the Plaintiff’s
Motion for Summary Judgment [Doc. 108]. For the reasons stated below, Best Service
and the Menchions’ Motion for Summary Judgment is GRANTED. The Plaintiff’s
Motion for Summary Judgment is GRANTED in part and DENIED in part.
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I. Background
On May 10, 2006, Kenneth and Padrica Menchion obtained a $200,000 home
equity line of credit with American Home Mortgage.1 American Home Mortgage
assigned the note to Prime Asset Fund V, LLC (“Prime Asset”), through an
indorsement on the face of the note.2 On August 17, 2011, Prime Asset entered into
a written collection agreement with The Best Service Co., Inc. (“Best Service”).3
Prime Asset assigned the Menchion account to Best Service for collection on
November 15, 2011, and executed a written assignment for collection to that effect on
November 29, 2012.4 On February 7, 2013, Best Service filed a lawsuit in the State
Court of Henry County, Georgia, to collect on the Menchion account.5 A default
judgment was entered against the Menchions on April 11, 2013.6 On June 26, 2013,
Best Service and the Menchions entered a settlement agreement under which the
1
Pl.’s Statement of Facts ¶ 1. For simplicity, the Court will hereafter refer
to the line of credit as a “note” or “account.”
2
Id. ¶ 3.
3
Defs.’ Statement of Facts ¶ 1.
4
Id. ¶ 2.
5
Id. ¶ 5.
6
Id. ¶ 6.
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Menchions would pay $150,000 in full satisfaction of the judgment.7 The Menchions
paid Best Service $150,000, and Best Service then cancelled the writ of fieri facias
recorded in connection with the state court default judgment.8 Best Service retained
$60,000 from the settlement proceeds; Best Service paid Prime Asset the remaining
$90,000.9
On December 21, 2012, Prime Asset sold a portfolio of accounts to the Plaintiff,
The Cadle Company II, Inc., pursuant to an Unsecured Loan Sale Agreement.10 Prime
Asset represented that it had the right to sell the unsecured loans included in the
agreement, that no one held any competing claims to the loans, that it was the sole
owner of the loans, and that no loan included was the subject of a pending or
threatened claim.11 On March 22, 2013, Cadle filed a lawsuit on the note against the
Menchions in the State Court of Henry County, Georgia.12 Cadle dismissed its state
court lawsuit without prejudice on May 1, 2013, in order to pursue additional claims
7
Id. ¶ 7.
8
Id. ¶ 8.
9
Id. ¶ 9.
10
Pl.’s Statement of Facts ¶ 9.
11
Id. ¶ 13.
12
Id. ¶ 18.
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against the Menchions, Prime Asset, and Best Service.13 Cadle filed this lawsuit,
claiming that it is entitled to recover from the Menchions on the note, as well as from
Best Service and Prime Asset. The Menchions, Best Service, and Cadle all move for
summary judgment.
II. Legal Standard
Summary judgment is appropriate only when the pleadings, depositions, and
affidavits submitted by the parties show no genuine issue of material fact exists and
that the movant is entitled to judgment as a matter of law.14 The court should view the
evidence and any inferences that may be drawn in the light most favorable to the
nonmovant.15 The party seeking summary judgment must first identify grounds to
show the absence of a genuine issue of material fact.16 The burden then shifts to the
nonmovant, who must go beyond the pleadings and present affirmative evidence to
show that a genuine issue of material fact does exist.17 “A mere ‘scintilla’ of evidence
13
Id. ¶ 24.
14
FED. R. CIV. P. 56(a).
15
Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970).
16
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
17
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
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supporting the opposing party’s position will not suffice; there must be a sufficient
showing that the jury could reasonably find for that party.”18
III. Discussion
A. Claims Against Prime Asset
The Plaintiff moves for summary judgment on its claim for breach of contract
against Prime Asset. While there is no dispute that Prime Asset breached its
warranties when it sold the Menchion account to the Plaintiff after having already
assigned it to Best Service, the contract between the parties contemplates such a
situation. Specifically, Section 6.3 of the Loan Sale Agreement states that “[i]f on any
date between the Closing Date and April 30, 2013, the Buyer discovers that the Seller
breached any representation or warranty set forth in [the] Agreement . . . then Seller
shall repurchase the subject Unsecured Loans at the Repurchase Price.”19 Parties are
allowed to limit their remedies under a contract as long as there is not an unreasonable
disparity in remedy.20 Here, the limitation of remedy is reasonable. It has a time limit
and is restricted to breaches of representations or warranties during that time period.
18
Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990).
19
Prime Asset Fund V, LLC’s Resp. to Pl.’s Mot. for Summ. J., Ex. 1, §
6.3.
20
Inlet Beach Capital Investments, LLC v. F.D.I.C., 778 F.3d 904, 906
(11th Cir. 2014).
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This is reasonable given the number of loans that are packaged and the potential for
including one inadvertently, like what happened here. The Plaintiff’s motion for
summary judgment should be denied.
The Plaintiff also moves for summary judgment on its claim for money had and
received against Prime Asset. A claim for money had and received requires proof that
the defendant has money that the plaintiff is entitled to recover and that the defendant
is not, in good conscience, entitled to retain.21 Here, because the Loan Sale Agreement
between the Plaintiff and Prime Asset explicitly limits remedies in a situation such as
this one, the only money the Plaintiff is entitled to is the $762.68 repurchase price, as
contemplated in Section 6.3 of the Loan Sale Agreement. The Plaintiff is not entitled
to any of the proceeds of the Menchion account. The Plaintiff’s motion for summary
judgment on the claim for money had and received against Prime Asset should be
denied.
B. Claims Against Best Service
Best Service moves for summary judgment on the Plaintiff’s claim for tortious
interference. In Georgia, a claim for tortious interference requires proof that the
defendant acted improperly or wrongfully without privilege, acted purposely and with
malice with the intent to injure, induced a breach of contractual obligations or caused
21
William N. Robbins, P.C. v. Burns, 227 Ga. App. 262, 265 (1997).
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a party or third party to discontinue or fail to enter a business relationship with the
plaintiff, and proximately caused damage to the plaintiff.22 For the purpose of tortious
interference, “privilege means legitimate economic interests of the defendant or a
legitimate relationship of the defendant to the contract, so that it is not considered a
stranger, interloper, or meddler.”23 Here, Best Service’s actions were privileged. Prime
Asset assigned the Menchion account to Best Service for collection.24 Due to that
agreement, Best Service had an economic interest in the Menchion account. Because
Best Service’s actions were privileged, the Plaintiff cannot prove a claim for tortious
interference. Furthermore, the Menchions were in default on their account in April of
2007.25 Because they had already breached the contract in 2007, Best Service could
not have induced the Menchions to breach a contract – Best Service was not assigned
the account for collection until 2012. This defeats another element of the Plaintiff’s
claims. Best Service’s motion for summary judgment on the claim for tortious
interference should be granted. Additionally, because this Court grants summary
22
Dalton Diversified, Inc. v. AmSouth Bank, 270 Ga. App. 203, 208-09
(2004).
23
Disaster Servs., Inc. v. ERC P’ship, 228 Ga. App. 739, 741 (1997).
24
Milstein Decl. ¶¶ 3-5, Ex. A.
25
Defs. Kenneth and Padrica Menchion’s Resp. in Opp’n to Pl.’s Mot. for
Summ. J., at Ex. A, p. 101-102.
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judgment on the claim for tortious interference, the Plaintiff’s claim for punitive
damages also must be dismissed. Best Service’s motion for summary judgment on that
claim should also be granted.
The Plaintiff and Best Service both move for summary judgment on the
Plaintiff’s claim for money had and received against Best Service. A claim for money
had and received requires proof that the defendant has money that the plaintiff is
entitled to recover and that the defendant is not, in good conscience, entitled to
retain.26 Here, Best Service only retained the $60,000 that its assignment for collection
from Prime Asset entitled it to retain. Additionally, because this Court finds that the
Menchion account is to be repurchased by Prime Asset, the Plaintiff has no claim to
any proceeds from that account. Best Service’s motion for summary judgment on the
claim for money had and received should be granted. The Plaintiff’s motion on that
claim should be denied. Best Service moves for summary judgment on the Plaintiff’s
claim for attorneys’ fees. There is no evidence that Best Service acted in bad faith,
was stubbornly litigious, or has caused the Plaintiff unnecessary trouble and expense.
Best Service’s motion for summary judgment on the claim for attorneys’ fees should
be granted.
26
William N. Robbins, P.C. v. Burns, 227 Ga. App. 262, 265 (1997).
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The Plaintiff moves for summary judgment on Best Service’s counterclaim for
unjust enrichment. That counterclaim is in the nature of a claim for setoff. Because
this Court grants summary judgment on all claims against Best Service, there is no
need for setoff. Best Service has not conveyed any benefit on the Plaintiff that would
entitle Best Service to recovery for unjust enrichment. The Plaintiff’s motion for
summary judgment on the counterclaim for unjust enrichment should be granted.
C. Claims Against the Menchions
The Plaintiff, the Menchions, and Best Service all move for summary judgment
on the Plaintiff’s claim to set aside the state court judgment against the Menchions.
The Plaintiff moves to set aside the judgment under O.C.G.A. § 9-11-60(d). The
Georgia Court of Appeals has held, however, that only the person against whom the
judgment is rendered may raise a collateral attack under that statute.27 Because the
judgment here was not rendered against the Plaintiff, it cannot move to set aside that
judgment. The Defendants’ motion for summary judgment on the claim to set aside
the judgment should be granted and the Plaintiff’s motion for summary judgment
should be denied.
27
Peek v. Southern Guaranty Ins. Co., 142 Ga. App. 671, 672 (1977), rev’d
on other grounds, 240 Ga. 498 (1978).
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The Plaintiff and the Menchions move for summary judgment on the Plaintiff’s
claim on the note against the Menchions. The Menchions argue that Cadle is barred
from re-litigating claims against them under the doctrine of either collateral estoppel
or res judicata. In Georgia, collateral estoppel requires proof that an issue of fact was
actually litigated and determined by a valid judgment and that the determination was
essential to the judgment.28 Res judicata requires identity of the cause of action,
identity of the parties or their privies, and previous adjudication on the merits by a
court of competent jurisdiction.29
Because the state court judgment was a default judgment, the issue was not
actually litigated, so collateral estoppel cannot apply. Only res judicata is at issue. The
Plaintiff does not contest that the cause of action here is identical to that in the state
court judgment. Instead, the Plaintiff argues that there is no identity of the parties
because it was not involved in the initial litigation. Identity of the parties exists where
the party to the judgment represented the same legal right as that at issue in the present
matter.30 Here, Best Service and Prime Asset represented the same legal interest that
the Plaintiff would have represented – recovering on the note. Identity of the parties
28
Kent v. Kent, 265 Ga. 211 (1995).
29
Waldroup v. Green Cnty. Hosp. Auth., 265 Ga. 864, 867 (1995).
30
Pinkard v. Morris, 215 Ga. App. 297, 298 (1994).
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therefore exists. The State Court of Henry County, Georgia, also had jurisdiction in
this matter. And a default judgment is a judgment on the merits.31 Res judicata
therefore bars the Plaintiff from suing the Menchions to recover on the note. And
rightly so. If this Court were to hold otherwise, the Menchions would potentially be
subject to double liability. This is not to say, however, that the Plaintiff is without
remedy – instead it can sue Best Service and Prime Asset to recover any money it is
due, which is exactly what it did. Additionally, even if the Plaintiff had not been in
privity with Best Service, because this Court finds today that the Menchion account
was subject to repurchase, the Plaintiff would not be entitled to recover from the
Menchions. The Menchions’ motion for summary judgment on the Plaintiff’s claim
on the note should therefore be granted and the Plaintiff’s motion for summary
judgment should be denied.
IV. Conclusion
For the reasons stated above, the Defendants The Best Service Co., Inc., Padrica
Menchion and Kenneth Menchion’s Motion for Summary Judgment [Doc. 107] is
GRANTED and the Plaintiff’s Motion for Summary Judgment [Doc. 108] is
GRANTED in part and DENIED in part.
31
Butler v. Home Furnishing Co., 163 Ga. App. 825 (1982).
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SO ORDERED, this 2 day of December, 2015.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
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