De Lage Landen Financial Services, Inc. v. Perkins Rowe Associates, LLC et al

Filing 110

RULING granting 98 Motion for Summary Judgment. The parties are instructed to contact the Court to set the briefing schedule on the issue of damages. Signed by Judge James J. Brady on 05/11/11. (PAH)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
DE LAGE LANDEN FINANCIAL
SERVICES, INC.
CIVIL ACTION
VERSUS
NO. 09-990-JJB-SCR
PERKINS ROWE ASSOCIATES,
INC., ET AL

RULING ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Plaintiff De Lage Landen Financial
Services, Inc.’s (“DLL”) Motion (doc. 98) for Summary Judgment. Defendants
Perkins Rowe Associates, L.L.C. (“PRA”), JTS Realty Services, L.L.C. (“JTS”),
Echelon Construction Services, L.L.C. (“ETS”), and Joseph T. Spinosa
(“Spinosa”) (collectively “Perkins Rowe”) have filed an opposition (doc. 105) to
which DLL has filed a reply (doc. 109). There is no need for oral argument. This
Court’s jurisdiction exists pursuant to 28 U.S.C. § 1332. For the reasons stated
herein the Court GRANTS Plaintiff’s motion.
Background
I. Facts
This case arises out of the alleged failure of Perkins Rowe to pay DLL
according to the terms of the parties’ agreement.

The following facts are

undisputed.
On October 3, 2007, Perkins Rowe executed a Master Lease Agreement
(“the Lease”) with Cisco Systems Capital Corporation (“Cisco”).
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Under the

Lease, Cisco was to install and lease to Perkins Rowe software and equipment
(“the System”) necessary for Perkins Rowe to centrally control the security,
lighting, music, etc., for the development it was constructing (doc. 98, ex. A). The
Lease required Perkins Rowe to make payments to Cisco in accordance with
Schedules and Progress Payments Addenda incorporated into the Lease (doc.
98, ex. A). 1 On or about December 11, 2007, Cisco assigned its rights under the
Lease to DLL, at which point DLL began expending funds necessary to complete
and operate the System (doc. 98, ex. C).
Cisco and DLL also took steps to secure their interests and guarantee
payment. On November 20, 2007, Cisco filed and recorded a UCC-1 Financing
Statement covering the collateral described in the Lease (doc. 98, ex. B). On
November 13, 2009, Cisco filed a UCC-3 Amendment stating that it had assigned
its interest in the collateral under the Lease to DLL (doc. 98, ex. D). In addition,
on November 15, 2007, each of the individual Defendants executed a Corporate
Guaranty (“Guaranty”) unconditionally guaranteeing payment and performance of
all of Perkins Rowe’s obligations under the Lease (doc. 98, ex. E). 2 Spinosa

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According to the Lease, if Perkins Rowe failed to make required Progress Rent Payments, then Perkins
Rowe was immediately responsible for the total cost advanced by Cisco for equipment, goods, software
and services, together with interest, attorneys fees and other costs set forth in the Lease (doc. 98, ex. A,
§ 5).
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The Guaranty states:
Guarantor hereby unconditionally guarantees to [Cisco/DLL] and its
successors and assigns (i) the due and punctual payment to [Cisco/DLL]
when due of all rent obligations and all other amounts coming due under
the Lease, including, without limitation, all indemnification payments,
whether as a result of acceleration, maturity or otherwise, (ii) the full,
prompt and unconditional performance of every obligation to be
performed by [Perkins Rowe] under the Lease, and (iii) all expenses of
obtaining or endeavoring to obtain payment or performance thereof or

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signed an addendum to the Guaranty limiting his liability to the lesser of fifty
percent of the obligations owing and due or $1,000,000.00 (doc. 98, ex. E).
During the installation of the system, DLL spent over $1.3 million on
equipment, software and services (doc. 98, ex. F).

However, Perkins Rowe

failed to make any of the payments required by the Lease.
II. Procedural History
On November 19, 2009, DLL filed suit against Perkins Rowe to recover the
funds it spent on the System and to enforce its security interest (doc. 1). On
February 17, 2010, Perkins Rowe answered the complaint and asserted
counterclaims against DLL (doc. 8).

Perkins Rowe asserts that DLL caused

Perkins Rowe to default because DLL (1) selected contractors whom it knew
could not timely install the equipment; (2) improperly notified the contractors to
cease performing installations; and (3) did not notify Perkins Rowe that it had
been assigned Cisco rights under the Lease (doc. 96).
On March 28, 2011, DLL filed its Motion (doc. 98) for Summary Judgment.
DLL asserts that Perkins Rowe’s counterclaim is foreclosed by the terms of the
Lease. Moreover, DLL asserts that there are no genuine issues of material fact
as to Perkins Rowe’s breach of the Lease, the individual Defendants’ liability as
guarantors, or the validity of its security interest.

security therefore, or of enforcing this Guaranty, including attorneys’ fees
and other legal expenses. If more than one entity executes this
Guaranty, the liability of each such Guarantor hereunder shall be joint
and several.
(doc. 98, ex. E) (emphasis added).

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On April 18, Perkins Rowe filed its motion in opposition (doc. 105).
Perkins Rowe asserts that there are genuine issues of material fact as to (1)
whether Defendants may be held liable despite that DLL told its contractors to
stop working; (2) the extent to which Spinosa agreed to guarantee payment and
performance of Perkins Rowe’s obligations under the Lease; and (3) whether
DLL has a valid security interest in the System. On May 3, 2011, DLL filed its
reply (doc. 109). DLL asserts that the factual disputes cited by Perkins Rowe are
nonexistent or immaterial.
Standard of Review
A motion for summary judgment should be granted when the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c).
If the dispositive issue is one on which the nonmovant will bear the burden of
proof at trial, the moving party satisfies its burden by pointing out that there is
insufficient proof concerning an essential element of the nonmovant’s claim.
Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the issue is one in which
the movant bears the burden of proof at trial, the movant must demonstrate the
absence of material facts and entitlement to judgment as a matter of law. Id. at
321.

If the movant does so, in order to survive the motion for summary

judgment, the nonmovant must show that a genuine issue of material fact
remains for the factfinder to resolve. Id. at 323. In either case, the court must
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construe all facts in the light most favorable to the non-movant and draw all
reasonable inferences in that party’s favor. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 255 (1986). A “genuine issue of material fact” exists only when a
reasonable fact-finder could return a verdict in the non-movant’s favor. Id. at
248. In considering a motion for summary judgment in a contractual dispute, “the
interpretation of an unambiguous contract is a matter of law,” and a district court
may properly grant summary judgment if a contract is unambiguous. S. Natural
Gas Co. v. Pursue Energy, 781 F.2d 1079, 1081 (1986).
Discussion
I. Plaintiff’s Claims
A. Defendants’ breach
Plaintiff asserts that it was entitled under the Lease to instruct its
contractors to cease working when Perkins Rowe defaulted (doc. 98).
Defendants assert that Plaintiff violated the Lease by failing to pay the
contractors and, as a result, they did not receive a completed System as required
by the Lease (doc. 105).
“[C]ourts are bound to give legal effect to all legal agreements according to
the true intent of the parties, and that the intent is to be determined by the words
of the contract when these words are clear and explicit and lead to no absurd
consequences.” U.S. v. Warren Bros., 365 F. Supp. 528, 530 (M.D. La. 1973).
As such, an unambiguous contract’s terms form the law governing the dispute

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and a court construing the contract may properly grant summary judgment. S.
Natural Gas Co., 781 F.2d at 1081; Warren Bros., 365 F. Supp. at 530.
The Court finds that there are no genuine issues of material fact. The
Lease required Perkins Rowe to make periodic payments to Cisco/DLL in
accordance with Schedules and Progress Payments Addenda incorporated into
the Lease (doc. 98, ex. A). Moreover, according to the Lease, if Perkins Rowe
failed to make a payment, Cisco/DLL could hold Perkins Rowe immediately
responsible for the total cost that Cisco/DLL advanced for equipment, software
and services, together with interest and attorneys fees (doc. 98, ex. A, § 5).
The Court also finds that Plaintiff is entitled to judgment as a matter of law.
Because the Lease is unambiguous, its terms form the law governing the
dispute. Warren Bros., 365 F. Supp. at 530. The Lease defines Perkins Rowe’s
failure to make lease payments as a default (doc. 96, ex. A, § 13). Under the
Lease, DLL was entitled to terminate any and all obligations to Perkins Rowe—
including its obligation to continue funding the installation of the System—in the
event that Perkins Rowe defaulted and failed to cure its default within ten days
(doc. 96, ex. A, § 14). It is undisputed that Perkins Rowe failed to make required
lease payments and failed to cure within ten days. Therefore, the Court finds
that entry of summary judgment in Plaintiff’s favor is appropriate. S. Natural Gas
Co., 781 F.2d at 1081.
B. The Guaranty

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DLL asserts that it is entitled to enforce its rights under the Lease against
the individual Defendants because each executed the Guaranty (doc. 98).
Defendants assert that genuine issues of material fact exist regarding the extent
to which Spinosa agreed to guarantee Perkins Rowe’s obligations (doc. 105).
Generally speaking, Louisiana courts uphold the parties’ choice-of-law
provision unless it violates a strong public policy of the State. Curtis Callais
Welding, Inc. v. Stolt Comex Seaway Holdings, Inc., 129 F. App’x 45, 52 (5th Cir.
2005). Here, the Guaranty is governed by New York law. In order to recover a
guaranty under New York law, the plaintiff must prove (1) the underlying
obligation; (2) the guaranty; and (3) the prime obligor’s default in payment on the
underlying obligation. Superior v. Fidelity Assurance, Ltd. v. Schwartz, 69 A.D.3d
924, 925-26 (N.Y. App. Div., 2010). In addition, the guaranty must be in writing
and executed by the party making the guaranty.

Schulman v. Westchester

Mech. Contractors, Inc., 56 A.D.2d 625, 625 (N.Y. App. Div., 1977).
The Court finds that there are no genuine issues of material fact. The
Guaranty is in writing, and was signed by each of the individual Defendants,
including Spinosa (doc. 98, ex. E). It states:
Guarantor hereby unconditionally guarantees to
[Cisco/DLL] . . . (i) . . . payment to [Cisco/DLL] when
due of all rent obligations and all other amounts coming
due under the Lease, including, without limitation, all
indemnification payments . . . (ii) . . . unconditional
performance of every obligation to be performed by
[Perkins Rowe] under the Lease, and (iii) all expenses
of . . . endeavoring to obtain payment or performance
thereof or security therefore, or of enforcing this
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Guaranty, including attorneys’ fees and other legal
expenses. If more than one entity executes this
Guaranty, the liability of each such Guarantor hereunder
shall be joint and several.
(doc. 98, ex. E) (emphasis added). The Guaranty goes on to state that each
guarantor’s liability is “unlimited in amount” and that “[t]he obligations of
Guarantor hereunder shall be absolute and unconditional” (doc. 98, ex. E, § 2).
Section 8.1 of the Guaranty, entitles DLL to declare immediately payable the
entire amount due and owing from the individual Defendants, with the exception
of Spinosa (Id.).

Spinosa’s liability under the Guaranty is limited by an

Addendum, which states that “[his] obligations . . . shall be limited to (i) the lesser
of fifty percent (50%) of all the Obligations or one million dollars ($1,000,000.00)”
(doc. 98, ex. E).
The Court also finds that Plaintiff is entitled to judgment as a matter of law.
DLL has proven all the necessary elements of an enforceable guaranty: (1) the
underlying obligation; (2) the guaranty; and (3) the prime obligor’s default in
payment on the underlying obligation. Superior, 69 A.D.3d at 925-26.

Here,

Perkins Rowe was obligated to pay DLL in accordance with schedules in the
Lease for the equipment used in the System (doc. 98, ex. A). In addition, the
individual Defendants agreed to unconditionally guaranty—and be jointly and
severally liable for— “all rent obligations and all other amounts coming due under
the Lease,” “unconditional performance of every obligation to be performed by
[Perkins Rowe] under the Lease,” and “all expenses of . . . enforcing [the]
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Guaranty” (doc. 98, ex. E). Finally, Plaintiff has established that Perkins Rowe
failed to make payments in accordance with the Lease’s provisions. Therefore,
the Court finds that summary judgment in Plaintiff’s favor is appropriate.
C. Plaintiff’s security interest
Plaintiff asserts that it has a valid security interest because its
predecessor, Cisco, filed a UCC-1 Financing Statement identifying it as the
secured party, Defendants as debtors, and covering the collateral described in
the Lease (doc. 98).

Thereafter, Cisco executed a UCC-3 Amendment

transferring its security interest to Plaintiff.

Defendants assert that there are

genuine issues of material fact regarding whether Plaintiff’s security interest has
priority over those of Intervenors KeyBank National Association (“KeyBank”) and
Jones LaSalle America (“JLA”) (doc. 105).
Under Louisiana Revised Statute 10:9-301(2), “while collateral is located in
a jurisdiction, the local law of that jurisdiction governs perfection.”

Under

Louisiana law, a lessor may acquire a security interest by filing a UCC-1
Financing Statement that (1) provides the name of the debtor; (2) provides the
name of the secured party . . . ; and (3) indicates the collateral covered by the
financing statement. La. R. S. § 10:9-502(a). In addition, the secured party can
transfer to another party its interest in the collateral by filing a UCC-3
Amendment. La. R. S. § 10:9-514.
The Court finds that there are no genuine issues of material fact. Prior to
assigning its rights to DLL, on November 20, 2007, Cisco filed and recorded in
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East Baton Rouge Parish a UCC-1 Financing Statement covering the collateral
described in the Lease, including the System’s equipment (doc. 98, ex. B). The
Financing Statement recognizes Defendants as debtors and Cisco as the
secured party (doc. 98, ex. B). On November 13, 2009, Cisco filed a UCC-3
Amendment in East Baton Rouge Parish stating that it had assigned its interest
in the collateral under the Lease to DLL (doc. 98, ex. D). Though the priority of
DLL’s security interest was previously in dispute, on April 28, 2011, the Court
entered a consent order and dismissed KeyBank’s and JLA’s claims against DLL
(doc. 108).
The Court also finds that DLL is entitled to judgment as a matter of law.
Cisco’s November 20, 2007 Financing Statement complied with the requirements
of Louisiana Revised Statute 10:9-502(a). It provided the names of the debtor
and secured party, Perkins Rowe and Cisco, respectively, and described the
equipment and software comprising the System as the collateral. In addition,
Cisco validly transferred its interest in the collateral under Louisiana Revised
Statute § 10:9-514. Cisco filed a UCC-3 Amendment naming it as the secured
party and DLL as the assignee, and providing the mailing address for each party.
Therefore, Plaintiff has a valid security interest in the collateral described in the
Lease and summary judgment in its favor is appropriate.
II. Defendants’ Counterclaims
A. DLL’s selection of contractors

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Plaintiff asserts that the Lease prevents Perkins Rowe from bringing a
claim due to Plaintiff’s selection of contractors (doc. 96). Perkins Rowe did not
oppose Plaintiff’s claim (doc. 105).
The Court finds that there are no genuine issues of material fact. The
Lease contains the following provisions: (1) “Lessee’s obligation to pay all lease
payments shall be absolute, unconditional and is not subject to any abatement,
set-off, defense or counter-claim for any reason whatsoever” (doc. 96, ex. A, §
2); (2) “Lessee has made the selection of [the] equipment, software and support
services based upon its own judgment and expressly disclaims any reliance on
statements made by Lessor” (doc. 96, ex. A, § 4); (3) “If a System is not properly
installed . . . Lessee shall make any claim on account thereof solely against the
applicable Supplier(s) . . . and shall not set up against Lessee’s obligations any
such claims as a defense, counterclaim, set-off or otherwise” (Id.); and (4)
“Regardless of cause, Lessee will not assert any claim whatsoever against
Lessor for loss of anticipatory profits or any other indirect special or
consequential damages” (Id.).
The Court also finds that Plaintiff is entitled to Judgment as a matter of law.
The Lease’s terms form the law governing the parties’ dispute. Warren Bros.,
365 F. Supp. at 530. Here, the Lease contains at least four provisions which
foreclose Perkins Rowe’s claim against DLL (see doc. 96, ex. A, §§ 2, 4).
Because the Lease is unambiguous, the Court finds that entry of summary
judgment in Plaintiff’s favor is appropriate. S. Natural Gas Co., 781 F.2d at 1081.
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B. DLL’s instruction to contractors to stop working
Plaintiff asserts that the Lease entitled it to notify its contractors to cease
work in the event that Perkins Rowe defaulted (doc. 96). Perkins Rowe did not
oppose Plaintiff’s claim (doc. 105).
The Court finds that there are no genuine issues of material fact. The
Lease states that “[u]pon the occurrence of any Event of Default, Lessor may . . .
terminate or cause the termination of . . . any or all Support or other services
provided under or in connection with the Software or Equipment . . . and may
terminate the Lessee’s right to use any or all of the Software, Equipment, and/or
Support” (doc. 96, ex. A, § 14). According to the Lease, an “Event of Default”
occurs when the Lessee “fails to make any Lease Payment, or any other
payment, as it becomes due and such failure is not cured within 10 days” (Id., §
13). In fact, Perkins Rowe failed to make required lease payments and failed to
cure its failures within ten days (Id.).
The Court also finds that Plaintiff is entitled to judgment as a matter of law.
The Lease’s terms form the law governing the parties’ dispute. Warren Bros.,
365 F. Supp. at 530. Under the Lease, DLL was entitled to terminate any and all
obligations to Perkins Rowe in the event that Perkins Rowe defaulted and failed
to cure its default within ten days (doc. 96, ex. A, § 14). Under the Lease,
Perkins Rowe’s failure to make lease payments and failure to cure within ten
days constitutes a default which entitled DLL to terminate its obligations to
Perkins Rowe (doc. 96, ex. A, § 13). Because the Lease is unambiguous, the
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Court finds that entry of summary judgment in Plaintiff’s favor is appropriate. S.
Natural Gas Co., 781 F.2d at 1081.
C. DLL’s failure to notify Perkins Rowe of the assignment from Cisco
DLL asserts that it had no obligation to notify Perkins Rowe that it had
been assigned Cisco’s rights under the Lease (doc. 96). Perkins Rowe did not
oppose Plaintiff’s claim (doc. 105).
The Court finds that there are no genuine issues of material fact. The
Lease states:
Lessor may at any time assign to any person or entity
(“Assignee”) all or part of any interest in this Agreement
or any Lease . . . and Lessor may grant security
interests in such system, subject to Lessee’s rights
therein. In such events, all the provisions of this
Agreement or any lease hereunder for the benefit of
Lessor shall inure to the benefit of Assignee. . . . The
rights of Assignee to the payment of the assigned Lease
Payments and other Lease payments . . . shall not be
subject to any defense, counterclaim, or set-off which
Lessee may have or assert against Lessor and Lessee
hereby agrees that it will not assert any such defenses,
set-offs, counterclaims and claims against the Assignee.
(doc. 96, ex. A, § 7) (emphasis added).
The Court also finds that Plaintiff is entitled to Judgment as a matter of law.
The Lease’s terms form the law governing the parties’ dispute. Warren Bros.,
365 F. Supp. at 530. Nowhere does the Lease require that DLL notify Perkins
Rowe of an assignment. Moreover, under the Lease, “the rights of the Assignee
[DLL] to the payment of the assigned Lease Payments and other lease Payments
. . . shall not be subject to any defense, counterclaim, or set-off which Lessee
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may have or assert against Lessor” (doc. 96, ex. A, § 7). Because the Lease is
unambiguous, the Court finds that entry of summary judgment in Plaintiff’s favor
is appropriate. S. Natural Gas Co., 781 F.2d at 1081.
Conclusion
Accordingly, the Court hereby GRANTS Plaintiff’s Motion (doc. 98) for
Summary Judgment. The parties are instructed to contact the Court to set the
briefing schedule on the issue of damages.
Signed in Baton Rouge, Louisiana this 11th day of May, 2011.

S

JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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