Bank of America, N.A. v. World of Smiles et al

Filing 21

ORDER granting 8 Motion for Summary Judgment. Signed by Judge Nannette Jolivette Brown. (jrc)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BANK OF AMERICA, N.A.

CIVIL ACTION

VERSUS

NO. 16-2874

WORLD OF SMILES, et al.

SECTION: “G”(1)
ORDER

Pending before the Court is Plaintiff Bank of America, N.A.’s (“Bank of America”)
“Motion for Summary Judgment.”1 Having reviewed the motion, the memoranda in support and
in opposition, the record, and the applicable law, the Court will grant the motion for summary
judgment.
I. Background
A.

Factual Background
In this collection action, Bank of America seeks to recover amounts that it alleges are due

to it under a loan it extended to A World of Smiles, LLC (“World of Smiles”).2 Bank of America
has sued Defendant World of Smiles as the defaulting borrower and Defendants Brigette N. Jones
(“Jones”) and Norman L. McGeathy, III (“McGeathy”) as the borrower’s guarantors.3 On March
28, 2011, Bank of America executed a Project Finance Term Loan Agreement (“Loan

1

Rec. Doc. 8.

2

Rec. Doc. 1 at 3. The original Loan Agreement listed the borrower as “Jones, McGeathy, DDS.” The parties
later executed change notification and acknowledgements changing the borrower’s legal name to “Kids 2 Adult, LLC”
and eventually changing the borrower’s legal name again to “A World of Smiles, LLC.” See Rec. Doc. 8-5 at 17–19.
The parties do not dispute that the Loan Agreement has been modified so that World of Smiles is now the borrower
under the Loan Agreement.
3

Id.

1

Agreement”) in favor of the borrower.4 By its terms, the Loan Agreement includes a promissory
note, a security agreement, and a guaranty agreement, “all of which are to be construed together
and are binding on the parties.”5
The Loan Agreement provides that Bank of America will make advances to the borrower
in amounts up to $600,000 for the purpose of financing the borrower’s dental practice.6 The Loan
Agreement also contemplates a “Project Closing Date,” at which point the advances are converted
into a permanent loan, which must be repaid in monthly installments.7 Several events of default
are set forth in the Loan Agreement, including the “failure to make any payment of the
Indebtedness.”8 The Loan Agreement also contains an acceleration clause, which provides that in
the event of default, Bank of America has the option to declare all remaining amounts due under
the Loan Agreement immediately due and payable, charge interest at the default rate, and exercise
all of Bank of America’s rights as a secured party.9 The Loan Agreement also contains a provision
allowing the collection of late fees in the event of late payments.10
Jones and McGeathy signed the Loan Agreement as the borrower’s authorized
representatives.11 In connection with the Loan Agreement, Jones and McGeathy also signed a
guaranty agreement, in which they each “absolutely, unconditionally, jointly and severally”

4

See Rec. Doc. 8-5 at 1.

5

Id.

6

Id. at 3.

7

Id.

8

Id. at 6.

9

Id. at 7.

10

Id. at 4.

11

Id. at 13.

2

guaranteed the payment of all indebtedness of the borrower when due.12 The guaranty provides
that it is a “continuing guaranty” and may not be terminated by the guarantors until all indebtedness
has been paid in full.13
Under the Loan Agreement, the borrower also granted Bank of America a security interest
in the “Collateral and the proceeds of the Collateral to secure payment and performance of the
Indebtedness.”14 “Collateral” is defined in the Loan Agreement as “all of the business personal
property and business assets of Borrower, and if applicable, Guarantor . . . now owned or hereafter
acquired . . . .”15 The Loan Agreement goes on to list several specific types of business personal
property and business assets.16
On September 6, 2012, the advances under the Loan Agreement were converted into a
permanent loan in the principal amount of $643,461.59 with a term of 180 months and a fixed
interest rate of 8.24 percent annually.17 Bank of America and World of Smiles executed a “Final
Disbursement, Change, and Repayment Schedule” which set forth the terms of the final loan and
was “merged into” and became part of the Loan Agreement.18 After the loan became permanent,
World of Smiles defaulted under the Loan Agreement in February 2014.19 The parties executed a

12

Id. at 14.

13

Id.

14

Id. at 4.

15

Id. at 11.

16

The specific types of collateral listed in the Loan Agreement include: accounts, chattel paper, goods and
inventory, equipment, instruments, investment property, documents, deposit returns, supporting obligations, fixtures,
purchase money security interest, and the borrower’s or guarantor’s rights in all patient lists, files and records, books,
and data relating to any of the collateral identified in the provision. See Rec. Doc. 8-5 at 11.
17

See Rec. Doc. 8-5 at 24.

18

Id.

19

See id. at 27.

3

forbearance agreement, as well as amendments to the forbearance agreement, such that Bank of
America agreed to forbear from exercising its rights under the Loan Agreement until the last
business day of July 2015.20
After Defendants failed to pay the unpaid balance by that time, on August 31, 2015, the
parties executed a Loan Modification Agreement in which the borrower acknowledged that the
amount due under the Loan Agreement as of August 31, 2015, was $704,926.36, consisting of
unpaid principal in the amount of $679,202.66, as well as unpaid interest.21 The Loan Modification
Agreement states that the maturity date of the loan is changed to February 28, 2016, at which time
all unpaid principal, interest, fees, and expenses “shall be due and payable in full.”22 The Loan
Modification Agreement also states that the interest rate is unchanged and remains 8.25 percent
annually.23 Defendants did not pay the full unpaid balance by the maturity date set forth in the
Loan Modification Agreement. The parties do not dispute that Bank of America provided
Defendants a written notice of default and an opportunity to cure on March 4, 2016.24 Moreover,
Defendants do not dispute that there is an “outstanding balance at this time” under the loan.25
According to Bank of America, as of May 31, 2016, Defendants are liable to Bank of America for
$672,736.97 in unpaid principal, as well as $29,809.29 in unpaid interest, and $6,520.62 in late

20

Id. at 27, 37, 47.

21

Id. at 53.

22

Id.

23

Id.

24

Id. at 60.

25

See Rec. Doc. 9 at 2.

4

fees.26 Bank of America further asserts that Defendants are liable for interest and late charges
accruing after May 31, 2016, and for costs and attorneys’ fees.27
B.

Procedural Background
Bank of America filed a complaint in this matter on April 6, 2016.28 Defendants filed an

answer to the Complaint on May 31, 2016.29 Bank of America filed the instant motion for summary
judgment on June 2, 2016, seeking collection of unpaid sums and a judgment recognizing the
validity and enforceability of the security interest granted by the Loan Agreement.30 Defendants
filed an opposition to the motion on June 14, 2016.31 With leave of Court, Bank of America filed
a reply memorandum on June 21, 2016.32
II. Parties’ Arguments
A.

Bank of America’s Arguments in Support of Summary Judgment
Bank of America contends that there are no genuine issues of material fact in this matter,

and accordingly, it is entitled to summary judgment.33 Bank of America asserts that there is no
dispute that World of Smiles executed the Loan Agreement and that the loan was converted to a
permanent loan on September 6, 2012.34 Bank of America further asserts that there is no dispute

26

Rec. Doc. 8-1 at 12.

27

Id.

28

Rec. Doc. 1.

29

Rec. Doc. 7.

30

Rec. Doc. 8.

31

Rec. Doc. 9.

32

Rec. Doc. 12.

33

Rec. Doc. 8 at 1.

34

Rec. Doc. 8-1 at 8 (citing Rec. Doc. 8-5).

5

that the parties executed a series of forbearance agreements in which World of Smiles and its
guarantors, Jones and McGeathy, acknowledged the amounts owed.35 Moreover, according to
Bank of America, the amount due by the maturity date of February 28, 2016, was never paid.36
Bank of America argues that under these circumstances, the Loan Agreement and guaranty
are binding on, and enforceable against, World of Smiles and its guarantors.37 Moreover, Bank of
America argues, it is undisputed that World of Smiles owed Bank of America the amounts due
under the Loan Agreement and that the guarantors unconditionally guaranteed World of Smiles’
obligations.38 Thus, according to Bank of America, the guarantors are personally liable for World
of Smiles’ breach of the Loan Agreement.39 Bank of America further argues that the amounts owed
by World of Smiles and its guarantors are undisputed.40 According to Bank of America, as of May
31, 2016, the amounts owed under the Amended Loan Agreement are as follows: $672,736.97 in
unpaid principal; $29,809.29 in interest; and $6,520.62 in late fees.41
According to Bank of America, a court in the Eastern District of Louisiana recently granted
summary judgment to Bank of America in a similar matter involving a similar professional practice
loan.42 Bank of America also asserts that it is entitled to attorneys’ fees incurred in connection with

35

Id.

36

Id.

37

Id. (citing Am. Bank v. Saxena, 553 So.2d 836, 842 (La. 1989); Dulin v. Levis Mitsubishi, Inc., 2001-2457
(La. App. 1st Cir. 1/20/02), 836 So.2d 340, 345; Griffin v. Lago Espanol, LLC, 2000-2544 (La. App. 1st Cir. 2/15/02),
808 So. 2d 833, 840; Boh Bros. Constr. Co. v. Price, 2000-2233 (La. App. 4th Cir. 8/29/01), 800 So. 2d 898, 902).
38

Id. at 9.

39

Id. (citing La. Civ. Code art. 3035; La. Civ. Code art. 3036; La. Civ. Code art. 3039; Guar. Bank & trust
Co. v. Jones, 489 So. 2d 368, 369–70 (La. App. 5th Cir. 1986); FDIC v. Cardinal Oil Well Serv. Co., Inc., 837 F.2d
1369, 1371 (5th Cir. 1988)).
40

Id. at 10.

41

Id. (citing Rec. Doc. 8-4).

42

Id. (citing Bank of America, N.A. v. Garden Dist. Pet Hosp., Inc., No. 15-1386, 2016 WL 952250 (E.D.

6

this suit, because the Loan Agreement specifically provides for such fees.43 Bank of America
requests summary judgment in its favor holding that Defendants are liable for the amounts owed
and recognizing the enforceability of the security interests created by the Loan Agreement
executed by World of Smiles.44
B.

Defendants’ Arguments in Opposition to the Motion for Summary Judgment
In their opposition, Defendants acknowledge the execution of the Loan Agreement and

admit that Jones and McGeathy personally guaranteed repayment of the loan.45 Defendants note
that subsequent to the initial loan, there were formal amendments to the financing agreement,
“including change notifications, a conversion of the loan from a term loan to a permanent loan,
forbearance agreements and a loan modification agreement.”46 Defendants also concede that there
is an outstanding balance on the loan at this time but argue that summary judgment is premature.47
Defendants argue that “there are genuine issues of material fact in regard to the total
resolution of the outstanding balance.”48According to Defendants, Bank of America has failed to
mitigate its purported damages in this case.49 Defendants assert that prior to the instant suit, they
tried to make a partial payment to Bank of America, but Bank of America rejected the partial

La. March 14, 2016)).
43

Id. at 11 (citing La. Civ. Code art. 2000; Steward & Stevenson Servs., Inc. v. Superior Boat Works, Inc.,
No. 94-2332, 94-2693, 1996 WL 470642, at *7–*8 (E.D. La. Aug. 16, 1996); CIT Group/Equip. Fin., Inc. v. Airport
Shuttle, Inc., No. 06-3272, 2008 WL 393696, at *1 (E.D. La. Feb. 11, 2008)).
44

Id. at 12.

45

Rec. Doc. 9 at 1.

46

Id.

47

Id. at 2.

48

Id.

49

Id.

7

payment.50 Moreover, Defendants assert that they “have consistently cooperated in providing
updated financial information to satisfy the underwriting concerns of [Bank of America]” but that
Bank of America nevertheless “summarily ended negotiations” with Defendants.51
C.

Bank of America’s Reply in Further Support of its Motion for Summary Judgment
In reply, Bank of America argues that it satisfied its summary judgment burden and that

Defendants’ opposition raises no genuine issue of material fact to defeat summary judgment.52
According to Bank of America, suits on unambiguous contracts, such as the Loan Agreement and
guaranty in this case, are particularly well suited for summary judgment treatment.53 Bank of
America states that the Loan Agreement contains a choice of law provision that states that the
Agreement will be governed by the internal laws of the state of the borrower’s principal place of
business, which in this case is Louisiana.54
Bank of America asserts that in order for it to prevail on an action to enforce a promissory
note, a lender must prove: (1) the person against whom enforcement is sought executed the note;
(2) the note is in default; (3) the lender is entitled to enforce the note; and (4) the outstanding
amount of the debt.55 Bank of America represents that in order to enforce a guaranty agreement,
the lender must prove that the person against whom enforcement is sought executed the guaranty.56

50

Id.

51

Id. at 2–3.

52

Rec. Doc. 12 at 2.

53

Id. (citing FDIC v. Cardinal Oil Well Serv. Co., Inc., 837 F.2d 1369, 1370–72 (5th Cir. 1998); United
States v. Grieshaber, No. 00-460, 2000 WL 1357512, at *2 (E.D. La. Sept. 19, 2000)).
54

Id. at 2 n.1 (citing Rec. Doc. 8-5).

55

Id. at 2–3 (citing Nat’l Collegiate Student Loan Trust 2003-1 v. Thomas, 48-627 (La. App. 2d Cir.
11/20/13), 129 So. 3d 1231, 1233–34).
56

Id. at 3 (citing N & F Logistic, Inc. v. Cathay Inn Int’l, Inc., 14-835 (La. App. 5th Cir. 4/15/15), 170 So.
3d 275, 278).

8

Bank of America argues that Louisiana law is well settled that in a suit on a promissory note, the
creditor makes out a prima facie case of its claim to enforce the note by producing the note sued
upon,57 and the same principle applies in the context of an action to enforce a guaranty.58
According to Bank of America, upon the production of the note and guaranty agreement, the
burden of proof shifts to the debtor to establish the nonexistence, extinguishment, or variance in
the payment of the obligation,59 and absent such proof, summary judgment in favor of the plaintiff
is appropriate.60 Bank of America notes that Defendants readily concede that they executed the
Loan Agreement and guaranty and that the Loan Agreement is currently in default.61 Thus, Bank
of America argues that it has not only made out a prima facie case to enforce the Loan Agreement
against Defendants but has also established that there is no genuine issue of material fact regarding
any of the elements necessary to enforce the Loan Agreement and guaranty under Louisiana law.62
Bank of America next argues that Defendants have not submitted summary judgment
evidence to substantiate their alleged partial payments to Bank of America and the amounts of
those payments.63 Moreover, Bank of America argues that Defendants have not directed the Court
to any provisions in the Loan Agreement or guaranty that contractually obligate Bank of America
to accept Defendants’ alleged partial payments when the entire balance on the Loan Agreement is

57

Id. (citing United States v. Irby, 517 F.2d 1042, 1043 (5th Cir. 1975); United States v. Laurent, No. 081566, 2009 WL 511250, at *1 (E.D. La. Feb. 27, 2009)).
58

Id. (citing Gulf Coast Bank and Trust Co. v. Elmore, 2010-1237 (La. App. 4th Cir. 1/26/11), 57 So. 3d 553,

59

Id. (citing Rettig v. Bruno, No. 14-996, 2014 WL 4720506, at *2 (E.D. La. Sept. 22, 2014)).

60

Id. (citing United States v. Bertucci, No. 00-0078, 2000 WL 1234560, at *2 (E.D. La. Aug. 29, 2000)).

61

Id. (citing Rec. Doc. 9).

62

Id. at 4 (citing United States v. Laurent, No. 08-1566, 2009 WL 511250, at *1 (E.D. La. Feb. 27, 2009)).

63

Id. at 5.

556).

9

due.64 Bank of America asserts that courts have rejected similar attempts by borrowers to avoid
summary judgment by putting forth unsubstantiated arguments that partial payment was
attempted.65 Bank of America argues that Defendants have failed to create any genuine issue of
material fact regarding the amounts due under the Loan Agreement as set forth in Bank of
America’s uncontested summary judgment affidavit.66 Moreover, Bank of America avers that
Defendants have not shown that the Loan Agreement and guaranty are unenforceable.67 Thus,
Bank of America argues that the Court should grant summary judgment in its favor.68
III. Law and Analysis
A.

Legal Standard
Summary judgment is appropriate when the pleadings, the discovery, and any affidavits

show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.”69 When assessing whether a dispute as to any material fact exists, the court
considers “all of the evidence in the record but refrains from making credibility determinations or
weighing the evidence.”70 All reasonable inferences are drawn in favor of the nonmoving party,
but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and
conclusions of law’ are insufficient to either support or defeat a motion for summary judgment.”71

64

Id.

65

Id. at 6 (citing United States v. Grieshaber, 2000 WL 1357512, at *2–*3).

66

Id. (citing Rec. Doc. 8-4).

67

Id.

68

Id.

69
Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
70

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir. 2008).

71

Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.

10

If the record, as a whole, “could not lead a rational trier of fact to find for the non-moving party,”
then no genuine issue of fact exists and the moving party is entitled to judgment as a matter of
law.72 The nonmoving party may not rest upon the pleadings, but must identify specific facts in
the record and articulate the precise manner in which that evidence establishes a genuine issue for
trial.73
The party seeking summary judgment always bears the initial responsibility of informing
the Court of the basis for its motion and identifying those portions of the record that it believes
demonstrate the absence of a genuine issue of material fact.74 Thereafter, the nonmoving party
should “identify specific evidence in the record, and articulate” precisely how that evidence
supports his claims.75 To withstand a motion for summary judgment, the nonmoving party must
show that there is a genuine issue for trial by presenting evidence of specific facts.76 The
nonmovant’s burden of demonstrating a genuine issue of material fact is not satisfied merely by
creating “some metaphysical doubt as to the material facts,” “by conclusory allegations,” by
“unsubstantiated assertions,” or “by only a scintilla of evidence.”77 Rather, a factual dispute
precludes a grant of summary judgment only if the evidence is sufficient to permit a reasonable
trier of fact to find for the nonmoving party. Hearsay evidence and unsworn documents that cannot

72

Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986).

73

See Celotex, 477 U.S. at 325; Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).

74

Celotex, 477 U.S. at 323.

75

Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871 (1994).

76

Bellard v. Gautreaux, 675 F.3d 454, 460 (5th Cir. 2012) (citing Anderson v. Liberty, 477 U.S. 242, 248–

49 (1996)).
77

Little, 37 F.3d at 1075.

11

be presented in a form that would be admissible in evidence at trial do not qualify as competent
opposing evidence.78
B.

Analysis
1.

Whether the Promissory Note and Guaranty are Enforceable

On a motion for summary judgment, the moving party bears the initial burden of
identifying those portions of the record that it believes demonstrate the absence of a genuine issue
of material fact.79 In support of its motion, Bank of America has produced the Loan Agreement,
which established a project loan of $600,000 and which states that it “is a promissory note, security
agreement and guaranty, all of which are to be construed together and are binding upon the parties
hereto.”80 The Loan Agreement lists World of Smiles as the borrower and contains signatures of
Jones and McGeathy as authorized signatories of the borrower.81 The Loan Agreement also
contains a guaranty, which contains signatures of Jones and McGeathy.82 The guaranty states that
“[e]ach Guarantor absolutely, unconditionally, jointly and severally guarantees the prompt
payment when due of all indebtedness.”83
The Loan Agreement states that at a “Project Closing Date,” the advances made under the
Loan Agreement would be converted to a permanent loan.84 In support of its motion, Bank of

78
79
80

Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987); Fed. R .Civ. P. 56(c)(2).
Celotex, 477 U.S. at 323.
Rec. Doc. 8-5 at 1.

81

Id. at 19. The borrower identified in the Loan Agreement was originally Jones, McGeathy, DDS but
through a Change Notification and Acknowledgment, was later changed to Kids 2 Adults Dental, LLC and finally, to
World of Smiles. See Rec. Doc. 8-5 at 1, 17.
82

Id. at 15.

83

Id. at 14.

84

Id. at 3.

12

America also submits a document titled “Final Disbursement, Change, and Repayment Schedule,”
(“Final Disbursement”), which sets forth the “final and permanent terms” for the Loan Agreement
and which the parties executed on September 6, 2012.85 The Final Disbursement states that the
final and permanent terms are “merged into and become part of” the Loan Agreement.86 The Final
Disbursement provides that the principal amount of the loan is $643,461.59 with a term of 180
months at a fixed interest rate of 8.25 percent.87 In further support of its motion, Bank of America
submits the Loan Modification Agreement dated August 31, 2015.88 The Loan Modification
Agreement indicates that as of August 31, 2015, the amount due under the loan was $679,202.66
in unpaid principal, as well as unpaid interest at an unchanged rate of 8.25% per year.89
It is well settled that suits on promissory notes are suitable questions for disposition on
summary judgment.90 In a suit for a collection of a promissory note under Louisiana law,91 the
plaintiff establishes a prima facie case by establishing that the defendant executed the note and by
producing the note.92 Once the note is produced, the burden then shifts to the defendant to establish

85

Id. at 24.

86

Id.

87

Id.

88

Id. at 53.

89

Id.

90

See Federal Deposit Ins. Corp. v. Cardinal Oil Well Servicing Co., Inc., 837 F.3d 1369, 1371 (5th Cir.
1988) (“Typically, suits on promissory notes provide fit grist for the summary judgment mill.”) (citing Lloyd v.
Lawrence, 472 F.2d 313 (5th Cir. 1973)).
91

The Loan Agreement dictates, and the parties do not dispute, that Louisiana law governs its enforceability.
See Rec. Doc. 8-5 at 9.
92

See Am. Bank v. Saxena, 553 So.2d 836, 842 (La. 1989); Dugas v. Modular Quarters, Inc., 88-1308 (La.
App. 3 Cir. 4/18/1990) So.2d 192, 200.

13

any affirmative defenses.93 This same rule applies to an action to enforce a guaranty.94 “Once the
plaintiff, the holder of a promissory note, proves the maker’s signature, or the maker admits it, the
holder has made out his case by mere production of the note and is entitled to recover in the absence
of any further evidence.”95 Under Louisiana Revised Statute § 10:3-104, a valid negotiable
instrument must “(a) be signed by the maker or drawer; and (b) contain an unconditional promise
to pay a sum certain in money; and (c) be payable on demand or at a definite time; and (d) be
payable to order or to bearer.”96
Here, Bank of America has produced the Loan Agreement, as well as the Loan
Modification Agreement, which memorialized World of Smiles’ promise to pay a set sum of
$679,202.66 plus interest, fees, and expenses to Bank of America by February 28, 2016.97 The
Loan Modification Agreement also states that the guarantors consent to and join the amendment
and contains the signatures of Jones and McGeathy as guarantors.98 Defendants do not dispute the
validity of their signatures.99 Jones and McGeathy admit that they “executed a Project Finance

93

Saxena, 553 So.2d at 842 (“When signatures are admitted or established, production of the instrument
entitles a holder to recover on it unless the defendant establishes a defense.”). See also Dugas, 561 So.2d at 200 (“Once
the note is introduced into evidence, the burden of proof shifts to the debtor to establish the nonexistence,
extinguishment, or variance in payment of the obligation”) (internal citation omitted).
94

Gulf Coast Bank and Trust Co. v. Elmore, 2010-1237 (La. App. 4 Cir. 1/26/11); 57 So. 3d 553, 556 (citing
Merchants Trust & Savings Bank v. Olano, 87-179 (La. App. 5 Cir. 8/26/87), 512 So.2d 1218). See also N&F Logistic,
Inc. v. Cathay Inn Intern., Inc., 14-835 (La. App. 5 Cir. 4/15/15), 170 So.3d 275.
95

Pannagl v. Kelly, 13-823 (La. App. 5 Cir. 5/14/14), 142 So. 3d 70, 74 (citing Johnson v. Drury, 99–608
(La. App. 5 Cir. 6/2/00), 763 So.2d 103, 109–110); Premier Bank, Nat'l Association v. Percomex, Inc., 92-243 (La.
App. 3 Cir. 3/3/93) 615 So. 2d 41; Thomas v. Bryant, 597 So.2d 1065 (La. App. 2nd Cir. 1992)). Under the Uniform
Commercial Code, as adopted by Louisiana, a “holder” is the party who possesses an instrument issued to him or his
order. La. Rev. Stat. § 10:1–201.
96

Id (citing La. Rev. Stat. § 10:3–104).

97

Rec. Doc. 8-5 at 53.

98

Id. at 58.

99

See Rec. Doc. 9 at 1.

14

Term Loan Agreement with the plaintiff” and that “as guarantors to the loan agreement,” they
“personally guaranteed repayment of the loan.”100 Moreover, Defendants do not present any
evidence or legal authority to support a claim that the Loan Modification Agreement or guaranty
is not valid.101 Because Bank of America has produced the promissory note and guaranty, and
Defendants admit to signing the note and guaranty, the Court finds that Bank of America is entitled
to enforce payment of the promissory note and guaranty, unless Defendants can establish a defense
by a preponderance of the evidence.102
Under Louisiana Revised Statute § 10:3-308, Defendants may successfully defeat
summary judgment if they establish, by a preponderance of the evidence, the grounds of defenses
raised in their Answer.103 Louisiana Revised Statute § 10:3-305 permits raising any defenses that
would be available against a simple contract enforcement suit.104 Here, Defendants have failed to
meet their burden to prove any of their raised defenses by a preponderance of the evidence.105
Here, Defendants’ Answer to the Complaint provides only a bare recital of several asserted
defenses without factual evidence or argument offered in support.106 In their opposition to

100

Id.

101

Id.

102

“If the validity of signatures is admitted or proved and there is compliance with Subsection (a), a plaintiff
producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under [La.
Rev. Stat. §] 10:3-301, unless the defendant proves a defense or claim in recoupment.” La. Rev. Stat. § 10:3-308.
103

See Wright v. Blue, No. 16-9405, 2016 WL 4799102, at *4 (E.D. La. Sept. 13, 2016) (Brown, J.) (citing
Saxena, 553 So. 2d at 842; Bank of America Nat. Trust & Sav. Ass’n v. Reeves, Nos. 94-2580, 94-3692, 1997 WL
537691, at *3 (E.D. La. Aug. 25, 1997) (Wilkinson, Mag.)).
104

See id. If Bank of America is found to be a holder in due course, then Defendants are limited to asserting
only “real” defenses provided for in Section 305. However, no party asserts that Bank of America is a holder in due
course, and the record indicates that the promissory note was executed by the parties in favor of Bank of America.
105

Wright, 2016 WL 4799102, at *4.

106

Rec. Doc. 7 at 5–6. See also Saxena, 553 So. 2d at 846. The affirmative defenses raised in Defendants’
Answer without any factual evidence in support are: (1) Bank of America’s claim is barred under the doctrine fo
waiver, ratification, estoppel, and unclean hands; (2) Bank of America has failed to mitigate its damages, including

15

summary judgment, it appears that Defendants argue that there are genuine issues of material fact
regarding the outstanding balance under the Loan Agreement.107 However, Defendants admit that
there is an outstanding balance under the Loan Agreement and do not assert any facts or point to
any evidence to contest Bank of America’s evidence of the amount due. Rather, without pointing
to any evidence in the record, Defendants assert that Bank of America rejected a partial payment
from Defendants “prior to the lawsuit being filed.”108
As the Fifth Circuit stated in Galindo v. Precision American Corporation, unsupported
allegations of conclusory facts and conclusions of law are insufficient to defeat a summary
judgment motion.109 A party “may not rest upon mere allegations contained in the pleadings,” but
rather must articulate the specific facts showing the existence of a genuine issue of material fact
for trial.110 Here, Defendants have not articulated specific facts demonstrating that the amount due
under the loan is in dispute. Even assuming that Defendants attempted to make a partial payment,
Defendants have not pointed to any contractual provision that requires Bank of America to accept
partial payment after default. The Loan Agreement expressly states that Bank of America can
accept late or partial payments without losing any of its rights under the agreement.111 However,

attorneys’ fees; (3) Bank of America’s claims were ratified “with express and tacit authorization by the plaintiff
through the relationship between the parties”; (4) Defendants did not breach any duties owed to Bank of America
under the agreement and under the law; and (5) the claims asserted are “subject to rights of set off, recoupment and
compromise.”
107

Rec. Doc. 9 at 2.

108

Rec. Doc. 9 at 2.

109

754 F.2d 1212, 1216 (5th Cir. 1985).

110

Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (citing Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 255–57 (1986)).
111
Rec. Doc. 8-5 at 4. The Court notes that even if Defendants proved that Bank of America had accepted
partial payment of the total amount due, Defendants could be entitled to credit for partial payment of the judgment but
they would not be entitled to a reduction in the amount of the award. See, e.g., Rheams v. McCray, 11-260 (La. App.
1 Cir. 5/9/77), 346 So. 2d 834, 835, writ denied, 351 So. 2d 154 (La. 1977).

16

the Loan Agreement does not require Bank of America to do so. Therefore, the Court finds that
Defendants have not met their burden to establish a defense to enforcement of the promissory note
and guaranty by a preponderance of the evidence.
Based on the foregoing, the Court finds that there are no genuine issues of material fact in
dispute here. Bank of America has submitted a valid promissory note and guaranty, and
Defendants have not established any defenses to their enforcement by a preponderance of the
evidence. Jones and McGeathy do not dispute that they executed the Loan Agreement as
authorized signatories of World of Smiles and that as guarantors to the Loan Agreement, they
personally guaranteed repayment of the loan.112 Pursuant to the Loan Modification Agreement
executed by the parties on August 31, 2015, the maturity date of the loan was extended to February
28, 2016, and on that date, “all unpaid principal, interest, fees and expenses” were “due and
payable in full.”113
Bank of America has submitted evidence that as of May 31, 2016, Defendants owe Bank
of America $709,066.88, including $672,736.97 in unpaid principal, $29,809.29 in interest,
$6,520.62 in late fees, plus attorneys’ fees, and costs.114 Defendants have admitted that there is “an
outstanding balance at this time”115 and have not submitted any evidence to contradict Bank of
America’s calculation of the amount due under the Loan Agreement. The Loan Agreement also
provides that the borrower will pay reasonable attorney’s costs and fees associated with “any

112

Rec. Doc. 9 at 1.

113

Rec. Doc. 8-5 at 53.

114

See Rec. doc. 8-4 at 7.

115

Rec. Doc. 9 at 2.

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purpose related to” the Loan Agreement.116 After Defendants failed to pay the full amount due by
the maturity date of February 28, 2016, Bank of America retained counsel to assist in collecting
the debt owed by Defendants.117 Therefore, the Court finds that summary judgment in favor of
Bank of America is warranted and Defendants shall pay Bank of America the sum of $709,066.88,
plus interest and late fees from June 1, 2016, at a rate of 8.25% until paid, as well as attorney’s
fees and costs.
2.

Whether the Security Interest is Enforceable

Bank of America also requests summary judgment in its favor recognizing the
enforceability of the security interest created by the Loan Agreement executed by World of Smiles,
LLC.118 A security interest is an interest in personal property or fixtures, created by contract, which
secures payment or performance of an obligation.119 A security interest is enforceable against the
debtor and third parties with respect to the collateral if: (1) the secured party gives value; (2) the
debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party;
and (3) the debtor has authenticated a security agreement that provides a description of the
collateral.120 In order to perfect a security interest, a financing statement must generally be filed in
the clerk of court of any parish.121 A financing agreement must contain the name of the debtor, the

116

Rec. Doc. 8-5 at 6.

117

Rec. Doc. 12-1 at 6; Rec. Doc. 8-5 at 60.

118

Rec. Doc. 8-1 at 12.

119
La. Rev. Stat. §10:1-201. See also Autovest, LLC v. Nash, 50-725 (La. App. 2 Cir. 6/22/16), 197 So. 3d
258, 262, reh'g denied (Aug. 4, 2016), writ denied, 2016-1644 (La. 11/18/16); Sonnier v. Boudreaux, 95-2127 (La.
App. 1 Cir. 5/10/96), 67 So. 2d 713, 717 (“[A] writing or writings . . . which adequately describes the collateral, carries
the signature of the debtor, and establishes that, in fact, a security interest was agreed upon, will satisfy the
requirements of the statute.”).
120

See La. Rev. Stat. § 10:9-203(b)(1)–(3). See also Autovest, LLC, 197 So. 3d at 262.

121

See La. Rev. Stats. §10: 9-310(a); § 10: 9-501(a)(4).

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name of the secured party, and indicate the collateral covered by the financing statement.122
Generally, the financing statement perfects the security interest for five years from the date of
filing and may be continued by filing a continuation statement after four and a half years after the
original financing statement has elapsed but before the five year period has finished.123
Here, Defendants do not dispute any facts regarding the security interest created by the
Loan Agreement. Bank of America gave value to World of Smiles by lending it money.124 The
Loan Agreement executed by World of Smiles and guaranteed by Jones and McGeathy contains a
provision that states that World of Smiles grants Bank of America a security interest in “the
Collateral.”125 “Collateral” is defined in the Loan Agreement as “all of the business personal
property and business assets of Borrower, and if applicable, Guarantor . . . now owned or hereafter
acquired . . . .”126 The Loan Agreement goes on to list several specific types of business personal
property and business assets.127 World of Smiles authenticated the security agreement through the
signature of its authorized representatives, Jones and McGeathy.128 Jones and McGeathy also
authenticated the security agreement as guarantors.129 On August 1, 2011, Bank of America

122

See La. Rev. Stat. § 10-9-502(a).

123

See La. Rev. Stat. §10:9-515(a), (e).

124

See generally Rec. Doc. 8-5.

125

Id. at 4.

126

Id. at 11.

127

The specific types of collateral listed in the Loan Agreement include: accounts, chattel paper, goods and
inventory, equipment, instruments, investment property, documents, deposit returns, supporting obligations, fixtures,
purchase money security interest, and the borrower’s or guarantor’s rights in all patient lists, files and records, books,
and data relating to any of the collateral identified in the provision. See Rec. Doc. 8-5 at 11.
128

See Rec. Doc. 8-5 at 13. See also Autovest, LLC, 197 So. 3d at 262 (“Authenticate means to sign; or to
execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present
intent of the authenticating person to identify the person and adopt or accept a record.”) (citing La. Rev. Stat. § 10:9102).
129

See Rec. Doc. 8-5 at 14.

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perfected the security interest by filing a financing statement in Caddo Parish that contained the
name of the secured party, the name of the debtor, and indicated the collateral covered by the
security agreement.130 On February 18, 2016, Bank of America timely filed a continuation
statement in Caddo Parish.131 Thus, the Court finds that the undisputed facts in the record indicate
that the security interest created by the Loan Agreement is enforceable, and summary judgment is
warranted in favor of Bank of America on this issue as well.132
IV. Conclusion
Bank of America has produced a valid promissory note executed by World of Smiles and
a valid guaranty executed by Jones and McGeathy. Defendants do not dispute the validity of the
promissory note and guaranty. Moreover, Defendants have not established any defense to payment
by a preponderance of the evidence and do not dispute the amount due to Bank of America under
the promissory note. The Loan Agreement included a provision requiring the borrower to pay late
fees, as well as costs and expenses related to the enforcement of the Loan Agreement. Thus, the
Court finds that summary judgment in favor of Bank of America is warranted and that Defendants
are liable to Bank of America for the amount due under the promissory note as of May 31, 2016,
plus interest and late charges accruing after May 31, 2016, as well as costs and fees. The
uncontroverted evidence in the record also indicates that the parties executed a valid security
interest. Thus, the Court finds that summary judgment is appropriate on that issue as well.
Accordingly,

130

See Rec. Doc. 8-5 at 21.

131

See id. at 22.

132
Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986). See also, e.g., Bank of America,
N.A. v. Garden Dist. Pet Hotel, Inc., No. 15-1386, 2016 WL 952250, at *5 (E.D. La. Mar. 14, 2016) (Vance, J.)
(applying Louisiana law and granting summary judgment in favor of plaintiff where defendant did not challenge
validity of security interest).

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IT IS HEREBY ORDERED that Bank of America’s “Motion for Summary Judgment”133
is GRANTED.
IT IS FURTHER ORDERED that Defendants pay Bank of America the sum of SEVEN
HUNDRED AND NINE THOUSAND SIXTY-SIX and 88/100 DOLLARS ($709,066.88), plus
interest from June 1, 2016, at a rate of 8.25% until paid and attorney’s fees and costs.
NEW ORLEANS, LOUISIANA, this ____ day of February, 2017.

27th

_________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

133

Rec. Doc. 8.

21