Ameris Bank v. Sailing Vessel Yemaya et al

Filing 46

ORDER granting(43) Motion for Summary Judgment in case 2:09-cv-02865-DCN Signed by Chief Judge David C Norton on 08/25/11.Associated Cases: 2:09-cv-02865-DCN, 2:10-cv-00410-DCN(kozi, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
Ameris Bank, formerly doing business as
Island Community Bank, NA,

)
)
)
Plaintiff,
)
)
vs.
)
)
Sailing Vessel “Yemaya” Official Number
)
640613, her engines, bowspirit, anchor, cables,
)
chains, rigging, tackle, apparel, furniture and all
)
accessories hereunto appertaining and belonging
)
to her, in rem, and Charleston Luxury Sailing
)
Charters, Inc., Palmetto Spine Center, and
)
Hubert Alan Faulk, in personam,
)
)
Defendants.
)
__________________________________________)

Civil No. 2:09-CV-2865-DCN

ORDER AND OPINION

This matter is before the court on plaintiff’s motion for summary judgment
pursuant to Federal Rule of Civil Procedure 56. Defendant Charleston Luxury Sailing
Charters, Inc. (“CLSC”) defaulted on a loan provided by plaintiff and guaranteed by
defendants Palmetto Spine Center (“PSC”) and Hubert Alan Faulk (“Faulk”). As a result,
plaintiff seeks damages, attorney’s fees, and costs. Defendants filed a response in
opposition. For the reasons set forth below, the court grants plaintiff’s motion.
I. BACKGROUND
On or about October 6, 2005, plaintiff loaned $225,600.00 to CLSC to facilitate
the purchase of the Sailing Vessel “Yemaya.” In exchange for the loan, CLSC executed a
note promising to repay the full loan amount plus interest. CLSC agreed to repay the loan
in monthly installments of $3,007.08, with all remaining unpaid principal and interest due
1

on May 1, 2015. The note provides that plaintiff is entitled to collection costs from
defendants if the note is not timely paid. See Mot. Summ. J. Ex. 2, at 3. On or about the
same date, PSC and Faulk guaranteed the note. The identical unconditional guarantees
provide:
Guarantor unconditionally guarantees payment to Lender of all amounts
owing under the Note. This Guarantee remains in effect until the Note is paid
in full. Guarantor must pay all amounts due under the Note when Lender
makes written demand upon Guarantor. Lender is not required to seek
payment from any other source before demanding payment from Guarantor.
Mot. Summ. J. Ex. 3, at 1, 6. CLSC executed and granted to plaintiff a First Preferred
Ship Mortgage (“Mortgage”) on the vessel to secure payment of the note. The Mortgage
was filed with the United States Coast Guard National Vessel Documentation Center
pursuant to the requirements of the Ship Mortgage Act, 46 U.S.C. §§ 31301-31330.
The note states that the borrower is in default if, among other things, it “does not
make a payment when due” or “[f]ails to do anything required by this Note and other
Loan Documents.” Mot. Summ. J. Ex. 2, at 3. If a default occurs, the lender, plaintiff, is
entitled to “[r]equire immediate payment of all amounts owing under this Note” and
“[c]ollect all amounts owing from any Borrower or Guarantor,” including all costs and
expenses in enforcing the note, such as collection costs and reasonable attorney’s fees.
Id.
Plaintiff asserts that it performed its obligations under the note and the Mortgage;
however, CLSC and its guarantors failed to make timely payments, thereby defaulting on

2

the loan.1 As a result, plaintiff claims the following damages: (1) $175,401.91 in
principle, interest, and late fees as of November 23, 2010; (2) interest at the rate of
$30.76290 per day since November 24, 2010; (3) attorney’s fees (in an amount to be
determined); (4) $6,843.10 in U.S. Marshals Service fees; (5) $6,818.03 in substitute
custodian fees (Charleston City Boatyard); (6) $975 in vessel survey fees; and (7)
$780.54 in advertising costs for the arrest and sale of the “Yemaya.”
Plaintiff’s motion for summary judgment, filed on November 23, 2010, and the
facts above are supported by the affidavit of Charles Hudgens, Vice President, Special
Assets, Ameris Bank; a copy of the note executed by CLSC; copies of the unconditional
guarantees executed by PSC and Faulk; a copy of the Mortgage; and an abstract of title
filed with the National Vessel Documentation Center.2 On December 10, 2010,
defendants filed a response in opposition, in which they “concede that they are in default
on the loan” provided by plaintiff to CLSC. Resp. Opp’n 1. However, they argue that
“any amounts due and owed under the loan documents should be offset by funds received
by the Plaintiff from the Small Business Administration [(SBA)] regarding this matter.”
Id. In addition, defendants contest the amount of attorney’s fees and costs owed because
defendant CLSC “was making payments” to plaintiff and the seizure of the “Yemaya”

1

In addition to defendants’ failure to make payments on the “Yemaya,” plaintiffs claim
that defendants defaulted on the loan by failing to maintain insurance on the vessel,
properly register the vessel with the United States Coast Guard, and pay the vessel’s
property taxes. See Reply Ex. 6, at ¶¶ 7-8.
2

Plaintiff’s reply includes as attachments a second affidavit of Charles Hudgens, dated
February 23, 2010, which identifies the various ways defendants defaulted on the loan;
CLSC’s loan transcript; e-mail messages between Mr. Hudgens and Faulk; and
Charleston County Tax Records.
3

was “unnecessary,” as CLSC never attempted to conceal or move it. Id. Defendants
request that any amounts awarded to plaintiff, other than those owed “directly under the
loan, after the offset of funds received by the Plaintiff from the [SBA], be approved
separately after a full accounting of funds received from the [SBA] has been submitted to
the Court.” Id.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is proper “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). When the party moving for summary judgment does not bear the
ultimate burden of persuasion at trial, the burden for summary judgment may be
discharged by pointing out to the court that there is an absence of evidence to support the
nonmoving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The
nonmovant must then “make a showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear the burden of proof at
trial.” Id. at 322. The nonmovant “‘may not rest upon the mere allegations or denials of
his pleading, but . . . must set forth specific facts showing that there is a genuine issue for
trial.’” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (quoting First Nat’l
Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288 (1968)). Evidence should be viewed
in the light most favorable to the nonmoving party and all inferences drawn in its favor.
Anderson, 477 U.S. at 255. However, a mere “scintilla” of evidence will not preclude
summary judgment. Id. at 252.

4

III. DISCUSSION
Defendants admit they defaulted on the loan provided by plaintiff; therefore, there
is no genuine issue of material fact as to whether plaintiff is entitled to damages as a
result. However, defendants seek to reduce (1) plaintiff’s damages by claiming that they
are entitled to an SBA set-off and (2) plaintiff’s attorney’s fees and costs by claiming that
they were making payments to plaintiff and made no effort to conceal the “Yemaya.”
Neither claim has merit.
Defendants fail to cite any case law or offer any facts or affidavits in support of
their first claim, and they disregard the plain language of the note and the unconditional
guarantees. The note, which was created using SBA Form 147, unequivocally states that
the “[b]orrower waives all suretyship defenses.” Mot. Summ. J. Ex. 2, at 4. A
“‘[s]uretyship is a contractual relation resulting from an agreement whereby one person,
the surety, engages to be answerable for the debt, default, or miscarriage of another, the
principal.’” Masterclean, Inc. v. Star Ins. Co., 556 S.E.2d 371, 373 (S.C. 2001) (quoting
74 Am. Jur. 2d Suretyship § 1 (1974)). In the instant case, defendants apparently attempt
to argue that the SBA is the surety or co-guarantor of the loan obtained by CLSC;
however, CLSC explicitly waived all suretyship defenses when it executed the note, and
the unconditional guarantees executed by PSC and Faulk, which were created using SBA
Form 148, state: “SBA NOT A CO-GUARANTOR. Guarantor’s liability will continue
even if SBA pays lender. SBA is not a co-guarantor with Guarantor. Guarantor has no
right of contribution from SBA.” Mot. Summ. J. Ex. 3, at 3, 8. Defendants’ conclusory
statement that plaintiff’s damages should be offset by funds paid by the SBA falls far
5

short of creating a genuine issue of material fact, thus, the court finds that plaintiff is
entitled to the total amount of damages requested.
Defendants’ second claim—that CLSC was “making payments” and that the
seizure was “unnecessary”—also fails because it ignores the following facts presented in
Mr. Hudgens’ February 23, 2010 affidavit:
4.

When S/V YEMAYA was arrested on November 6, 2009, Faulk had
not made a payment in almost three (3) months and was still owed
March 2009's payment of $3000.00.

5.

As of [February 23, 2010], Faulk still has not made another payment
on the note.

6.

At the time the vessel was arrested, Faulk and the other Defendants
were eight (8) months past due on the note and getting further past
due, nowhere near being current on the note, and in breach of Faulk’s
promise to pay $4500.00 per month or $2000.00 per week.

7.

At the time the vessel was arrested, Ameris Bank had discovered that
the vessel was not insured and not properly registered with the U.S.
Coast Guard.

8.

At the time the vessel was arrested, Ameris Bank discovered that
taxes had not been paid on the vessel for the years 2006, 2007, 2008,
and 2009, which is the entire time frame that the vessel has been
owned by [CLSC].

Reply Ex. 6, at ¶¶ 4-8. Under the terms of the note, plaintiff was entitled to take
possession of the vessel upon CLSC’s default, and to “[t]ake any action necessary to
protect the Collateral or collect amounts owing on this Note.” Mot. Summ. J. Ex. 2, at 3.
Considering all of the issues identified by Mr. Hudgens, the court finds that plaintiff’s
decision to arrest the vessel was not only reasonable but prudent. Once again, defendants
are unable to demonstrate the existence of a genuine issue of material fact. Accordingly,

6

plaintiff is entitled to reimbursement for all reasonable attorney’s fees and costs in this
matter.
IV. CONCLUSION
For the foregoing reasons, plaintiff’s motion for summary judgment is
GRANTED.
AND IT IS SO ORDERED.

________________________________________
DAVID C. NORTON
CHIEF UNITED STATES DISTRICT JUDGE
August 25, 2011
Charleston, South Carolina

7