Magnolia Financial Group LLC v. Antos et al

Filing 220

ORDER AND REASONS granting in part 146 Motion for Summary Judgment, for reasons set forth in document. Signed by Judge Jane Triche Milazzo. (ecm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MAGNOLIA FINANCIAL GROUP

CIVIL ACTION

VERSUS

NO: 15-7144

KENNETH ANTOS, ET AL

SECTION “H”

ORDER AND REASONS
Before the Court is a Motion for Partial Summary Judgment filed by
Plaintiff Magnolia Financial Group, LLC (“Magnolia”) (Doc. 146). For the
following reasons, the Motion is GRANTED IN PART.
BACKGROUND
This is a declaratory judgment action on a promissory note that was
removed from the 29th Judicial District Court for the Parish of St. Charles. On
November 11, 2013, Defendants KCI Investments, LLC (“KCI”), Kenneth
Antos, and David Becklean executed a Secured Promissory Note (the “Note”)
with Plaintiff Magnolia for the principal sum of $2,000,000 with an interest
rate of 15% per annum. Defendant Becklean also executed a Pledge and
Security Agreement (the “Security Agreement”) in favor of Magnolia, wherein
he pledged his interest in the proceeds of a Settlement Agreement dated

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September 22, 2012 among Twin Towers Trading Site Management, LLC
(“Twin Towers”), Jeffrey Brandon, Eric Scholer, Becklean, and SMG Group
(the “Settlement Agreement”). This pledge was recorded. Subsequently, on
January 13, 2015, Defendants Becklean, Antos, and KCI entered into a second
agreement to borrow an additional $100,000 from Plaintiff (the “Second Note”).
Plaintiff contends that no principal payments were paid on the Notes by the
maturity dates and that the entire principal amount plus significant interest
remains due and owing on the Notes. On November 20, 2015 Plaintiff filed the
instant suit seeking a declaratory judgment recognizing its rights under the
Notes and the Security Agreement.
The Court granted Plaintiff summary judgment recognizing Plaintiff as
attorney-in-fact for the purposes of carrying out the Security Agreement and
establishing Plaintiff’s right to collect attorneys’ fees at the termination of the
litigation. 1
Twin Towers intervened in this action and filed an interpleader
complaint relative to a portion of the Settlement Agreement proceeds. Plaintiff
responded, averring that Twin Towers is not entitled to interpleader relief.
Plaintiff also brought cross claims against, inter alia, Twin Towers, Donald
Porges, and Porges & Eisenberg CPA, LLC (collectively the “Porges
Defendants”) for tortious interference with contractual relations, fraud, bad
faith breach of conventional obligation, negligent breach of contract, negligent
misrepresentation, and general negligence. 2 Plaintiff alleges that Porges,
acting personally and on behalf of the other Porges Defendants, represented to
Plaintiff that Twin Towers would forward payments under the Settlement
Agreement to Plaintiff in the event of default on the Notes, but later acted to
prevent Plaintiff from obtaining those funds.
1
2

Doc. 25.
Docs. 48, 123.

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On motions by the Porges Defendants, the Court dismissed Plaintiff’s
claims for tortious interference with contractual relations and denied summary
judgment as to Plaintiff’s remaining claims. 3
Plaintiff now moves for summary judgment against Defendants KCI,
Antos, and Becklean on two issues. First, Plaintiff seeks summary judgment
as to the amount that Defendants KCI, Antos, and Becklean owe on the Notes.
Second, Plaintiff seeks summary judgment affirming that the Security
Agreement is valid and enforceable. Defendants KCI, Antos, and Becklean
have submitted no opposition to Plaintiff’s Motion. The Porges Defendants,
although not specifically named in Plaintiff’s Motion as parties against which
Plaintiff seeks judgment, oppose the portions of the Motion relating to the
Security Agreement out of an abundance of caution.
LEGAL STANDARD
Summary judgment is appropriate if “the record, including
depositions, documents, electronically stored information, affidavits or
declarations, stipulations . . . , admissions, interrogatory answers, or other
materials” “shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” 4 A genuine issue of fact
exists only “if the evidence is such that a reasonable jury could return a verdict
for the nonmoving party.” 5
In determining whether the movant is entitled to summary judgment,
the Court views facts in the light most favorable to the non-movant and draws
all reasonable inferences in his favor. 6 “If the moving party meets the initial

Docs. 70, 200.
Fed. R. Civ. P. 56 (2012).
5 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
6 Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir. 1997).
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burden of showing that there is no genuine issue of material fact, the burden
shifts to the non-moving party to produce evidence or designate specific facts
showing the existence of a genuine issue for trial.” 7 Summary judgment is
appropriate if the non-movant “fails to make a showing sufficient to establish
the existence of an element essential to that party’s case.” 8 “In response to a
properly supported motion for summary judgment, the nonmovant must
identify specific evidence in the record and articulate the manner in which that
evidence supports that party’s claim, and such evidence must be sufficient to
sustain a finding in favor of the nonmovant on all issues as to which the
nonmovant would bear the burden of proof at trial.” 9 The Court does “not . . .
in the absence of any proof, assume that the nonmoving party could or would
prove the necessary facts.” 10 Additionally, “[t]he mere argued existence of a
factual dispute will not defeat an otherwise properly supported motion.” 11
LAW AND ANALYSIS
As an initial matter, the Court will only consider evidence and argument
submitted on this particular Motion. Defendants Becklean, Antos, and KCI
have not opposed this Motion, but did file an opposition to an earlier, similar
motion for summary judgment by Plaintiff. The Court denied that motion as
premature with respect to the amount owing on the Notes. 12 The Court will not
consider any documents Defendants submitted in response to the previous
motion because a “court need only consider the cited materials” when deciding
Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995).
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
9 Johnson v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301
(5th Cir. 2004) (internal citations omitted).
10 Badon v. R J R Nabisco, Inc., 224 F.3d 382, 393–94 (5th Cir. 2000) (quoting Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)).
11 Boudreaux v. Banctec, Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).
12 See Doc. 25.
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a motion for summary judgment. 13 Defendants Becklean, Antos, and KCI have
cited no materials in opposition to this Motion.
When a motion for summary judgment is unopposed the court may not
grant the motion by default, but is entitled to accept as undisputed the facts it
presents. 14 “Rule 56 does not impose upon the district court a duty to sift
through the record in search of evidence to support a party’s opposition to
summary judgment.” 15 Instead, the proper inquiry to an unopposed motion for
summary judgment is to determine whether the facts advanced in the motion
and supported by appropriate evidence make out a prima facie case that the
movant is entitled to judgment. 16
I.

Amount Owed Under Promissory Notes
Under Louisiana law, the plaintiff in a suit to collect on a promissory

note establishes its prima facie case by producing the note. 17 Once the note is
introduced, the burden shifts to the defendant to prove a defense to the
obligation. 18 Here, Plaintiff cites to copies of the Notes and an affidavit from
Plaintiff’s custodian of business records swearing to their authenticity. 19 This
satisfies Plaintiff’s burden to prove that Defendants Becklean, Antos, and KCI
have an obligation to pay Plaintiff under the Notes.
In order to specify the amount owing on the Notes, Plaintiff cites to a
report and supporting affidavit prepared by an economist. 20 The economist
reviewed the text of the Notes and Plaintiff’s financial records, accounting for
interest accrued and payments made. He concludes that as of June 13, 2017,
Fed. R. Civ. P. 56(c)(3).
Eversley v. MBank Dallas, 843 F.2d 172, 174 (5th Cir. 1988).
15 Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006).
16 See Adams, 465 F.3d at 164; Eversley, 843 F.2d at 174.
17 Dugas v. Modular Quarters, Inc., 561 So. 2d 192, 200 (La. Ct. App. 1990).
18 Id.
19 Doc. 146-2 at 1–10, 55.
20 Doc. 146-3.
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Defendants Becklean, Antos, and KCI owe a total of $2,947,518.81 on the
Notes. This Court finds the report to be facially sound. Therefore in the absence
of any contrary evidence, Plaintiff is entitled to summary judgment that the
Notes are valid and that Defendants KCI, Becklean, and Antos solidarily owe
a total of $2,947,518.81 to Plaintiff as of June 13, 2017.
II.

Rights Under the Security Agreement
Plaintiff also moves for summary judgment in the form of a “declaration

and recognition of its rights under the Pledge and Security Agreement.” 21 As
the Porges Defendants point out in their opposition, this request for relief is
vague. At some points Plaintiff asks for “recogni[tion] of Magnolia’s full rights,
title and interest in” the Security Agreement, or simply “recognition [of] its
rights.” 22 Granting such a general request would require the Court either to
determine on its own exactly what rights the Security Agreement creates, or
to issue a judgment so vague as to be meaningless. Instead, the Court will
consider only the rights or legal issues that Plaintiff identifies with clarity.
As best the Court can tell, those include a judgment a) that the Security
Agreement is valid and enforceable, 23 b) that all terms and conditions of the
Security Agreement are valid as written, 24 c) that Plaintiff is the “holder” of

Doc. 146-1 at 1.
Doc. 146-1 at 2, 23–24.
23 Doc. 146-1 at 2, 24.
24 Doc. 146-1 at 17, 24.
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the Security Agreement, 25 and d) specifying Plaintiff’s rights as to the
collection of the pledged Settlement Agreement proceeds. 26
A. Issues a), b), and c): The Validity, Enforceability, and Terms of
the Security Agreement
The Court already granted partial summary judgment recognizing
Plaintiff as attorney-in-fact for the purposes outlined in the Security
Agreement. 27 Implicit in that judgment is the finding that the Security
Agreement is valid. Additionally, in this Motion Plaintiff submits and cites to
a signed copy of the Security Agreement and an affidavit attesting to its
authenticity, setting forth a prima facie case for the agreement’s validity. 28
The Defendants against whom this Motion is directed—Becklean, Antos,
and KCI—offer no argument that the Security Agreement as a whole, or any
of its provisions, is invalid. The Porges Defendants, although not named in
Plaintiff’s Motion, argue that the Security Agreement is invalid with respect
to the Settlement Agreement because the Settlement Agreement contains an
anti-assignment clause. 29 The Settlement Agreement does state that, “This
Agreement shall not be assignable by the FSAPs, absent the express written
consent of [Twin Towers].” 30 Becklean is a “FSAP” under the Security
Agreement and therefore nominally prohibited from assigning his interest in
it, which he did by executing the Security Agreement.
However, Louisiana law does not recognize anti-assignment clauses in
this situation. Louisiana Revised Statutes § 10:9-406 states that,
a term in an agreement between an account debtor
and an assignor . . . is ineffective to the extent that it .
Doc. 146-1 at 24.
Doc. 146-1 at 8, 17, 23.
27 See Doc. 25 at 6.
28 Doc. 146-2 at 2–3, 11–28.
29 Doc. 149 at 5–8.
30 Doc. 146-2 at 43.
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. . prohibits, restricts, or requires the consent of the
account debtor . . . to the assignment or transfer of, or
the creation, attachment, perfection, or enforcement of
a security interest in, the account, chattel paper,
payment intangible, or promissory note . . . . 31
The Settlement Agreement is a payment intangible under the terms of the
statute because it is a general intangible in which the primary obligation of the
account debtor, Twin Towers, is to pay money. 32 The provision of the
Settlement Agreement purporting to require the consent of Twin Towers,
therefore, does not prevent Plaintiff from perfecting a security interest in the
Settlement Agreement via the Security Agreement.
The Porges Defendants argue that Louisiana Civil Code article 2653
prohibits the assignment of a right when the contract creating the right forbids
its assignment. 33 However, Section 10:9-406 explicitly overrides any part of
Article 2653 to the contrary. 34
Plaintiff has proven the existence of the Security Agreement, proven that
Plaintiff and Defendant Becklean are parties to the Security Agreement, and
has identified the Settlement Agreement over which the Security Agreement
creates a security interest. No party has advanced a sound legal argument or
pointed to a dispute of material fact that calls the Security Agreement’s
validity into question. Accordingly, summary judgment is granted recognizing
the Security Agreement as valid and enforceable by Plaintiff as written.
B. Issue d): Magnolia’s Rights as to the Collection of the Pledged
Settlement Agreement Proceeds
Plaintiff also seeks summary judgment with regard to its rights
pursuant to the Security Agreement to collect the proceeds of the Settlement
La. Rev. Stat. § 10:9-406(d) (2017).
See id. § 10:9-102(61).
33 See La. Civ. Code art. 2653.
34 La. Rev. Stat. § 10:9-406(j).
31
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Agreement. The Security Agreement provides that, inter alia, Plaintiff
acquired a Chapter 9 security interest in the Settlement Agreement, as
implemented by Louisiana law, and that in the event of a default by the
borrower, Plaintiff may act to collect the Settlement Agreement proceeds. 35
The Security Agreement’s definition of default includes the failure of the
borrower to comply with its obligations under the Notes. 36
Plaintiff submits evidence that Defendants Becklean, Antos, and KCI
defaulted on their obligations under the Notes on or before October 21, 2015. 37
No party cites any evidence creating a factual dispute material to this issue.
Accordingly, summary judgment is granted that Defendants Becklean, Antos,
and KCI entered default under the Security Agreement by at least October 21,
2015.
Plaintiff appears to ask the Court to specify what rights Plaintiff has to
payments under the Security Agreement in the event of the debtors’ default.
Without a more specific request, the Court will only go so far as to state that
the post-default rights and obligations of Plaintiff and Defendants Becklean,
Antos, and KCI are specified by the Security Agreement, held to be valid above,
and the laws of Louisiana. The issue of Plaintiff’s post-default rights with
respect to the Porges Defendants—beyond the validity of the Security

See Doc. 146-2 at 19–22, 26.
See Doc. 146-2 at 25.
37 See Doc. 146-2 at 57–60.
35
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Agreement and the occurrence of default on the secured obligations—is outside
of the scope of the relief that Plaintiff seeks in this motion. 38
CONCLUSION
For the foregoing reasons, Plaintiff Magnolia’s Motion for Partial
Summary Judgment is GRANTED IN PART.

New Orleans, Louisiana this 27th day of September, 2017.

____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE

See Doc. 170 at 2–3 (“Summary Judgment is Not Requested as to the Porges
Defendants”).
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