Peach REO, LLC v. Rice et al
Filing
72
ORDER granting 54 Motion for Summary Judgment. Signed by Judge Samuel H. Mays, Jr on 3/13/2014.
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
Peach Reo, LLC,
Plaintiff,
v.
Richard K. Rice, Malcolm Kyle
Rice, and Thomas F. Schaffler,
Defendants.
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No. 12-2752
ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
Before the Court is Plaintiff Peach Reo, LLC’s (“Peach”)
September 26, 2013 Motion for Summary Judgment (the “Motion”).
(Mot.,
ECF
No.
54.)
Defendants
Richard
K.
Rice
(“Richard
Rice”), Thomas F. Schaffler (“Schaffler”), and Malcolm Kyle Rice
(“Malcolm
Rice”)
(collectively,
the
individual responses on November 7, 2013.
65; ECF No. 66.)
69.)
“Defendants”),
filed
(ECF No. 64; ECF No.
Peach replied on November 21, 2013.
(ECF No.
For the following reasons, the Motion is GRANTED.
I.
Background
In 2005, Vanguard Bank & Trust Co. (“Vanguard”) made two
loans (the “Loan” or “Loans”) to Premier of Fort Walton Beach,
LLC (“Premier”).
(Plaint. Stat. of Undisp. Facts, ECF No. 56 ¶¶
1, 2.)
The first Loan, dated January 14, 2005, was in the
original principal amount of $6,581,250.
(Id. ¶ 1.)
The second
Loan, dated March 24, 2005, was in the original principal amount
of $523,179.00.
(Id. ¶ 2.)
Vanguard merged into Coastal Bank
and Trust of Florida, which merged into SYNOVUS Bank.
6.)
(Id. ¶
On June 29, 2011, SYNOVUS Bank assigned the Loans and
related Loan
“Trust”).
documents
(Id.)
to Peach
Loanco Grantor Trust I (the
On August 9, 2012, the Trust assigned the
Loans and related Loan documents to Peach.
(Id. ¶ 7.)
Peach states that each of the Defendants guaranteed the
Loans.
(Id. ¶¶ 3-5.)
(ECF No 65-1 ¶ 5.)
Schaffler admits guaranteeing the Loans.
Malcolm Rice admits signing documents to
guarantee the Loans on January 14, 2009, and July 14, 2009, but
challenges their validity for lack of consideration.
67 ¶ 4; ECF No. 66 at 6.)
(ECF No.
Richard Rice takes the same position,
admitting executing a guaranty for the Loans on July 14, 2009,
but disputing its validity for lack of consideration.
64-1 ¶ 3; ECF No. 64 at 15.)
The Loans were renewed on January
14, 2009, and again on July 14, 2009.
9; Ex. F, ECF No. 1-10).
the
Defendants
have
not
(ECF No.
(Compl. Ex. E, ECF No. 1-
Premier defaulted on the Loans, and
honored
their
guaranties.
(Plaint.
Stat. of Undisp. Facts, ECF No. 56 ¶¶ 8-11.)
The Loans were secured by real property located in Florida.
(Fla. Ct. Order, ECF No. 57-2 ¶ 5.)
2
On January 3, 2013, the
Circuit Court of the First Judicial District in and for Okaloosa
County, Florida, entered a Summary Final Judgment of Reformation
and Foreclosure against Premier, Richard Rice, Malcolm Rice, and
Schaffler, finding that the amount due and owing to Peach under
the Loans totaled $10,932,839.06 as of January 3, 2013.
13.)
(Id. ¶
On or about July 17, 2013, Peach conducted a judicial
foreclosure
Stat.
of
sale
of
Undisp.
its
Facts,
real
ECF
property
No.
56
¶
collateral.
(Plaint.
13.)
was
Peach
the
successful bidder at the foreclosure sale, offering a bid of
$500,100.
(Id. ¶ 14.)
The parties agree that the fair market
value (“FMV”) of the property was $2,050,000.00.
ECF No. 69 at 6.)
(ECF 64-2 ¶ 4;
With interest accruing at the per diem rate
of $1,442.53, the total amount of the disputed obligations on
September 25, 2013, was $11,357,134.48.
No. 69 at 6 n.5.)
(ECF No. 55 at 2; ECF
Crediting $2,050,000 to the Defendants to
account for the FMV of the foreclosed property, Peach seeks a
judgment of $9,307,134.48 against them.
Peach
costs.
has
its
right
to
seek
additional
interest
and
(See Id.)
II.
Jurisdiction and Choice of Law
This
1332.
waived
(ECF No. 69 at 6 n.5.)
Court
has
diversity
jurisdiction
under
28
U.S.C
§
District courts have “jurisdiction of all civil actions
where the matter in controversy exceeds the sum or value of
$75,000, exclusive of interest and costs, and is between . . .
3
citizens of different states.”
28 U.S.C § 1332(a)(1).
Peach is
a Delaware limited liability company with its principal place of
business in Massachusetts.
(Compl., ECF No. 1 ¶ 1.)
of Peach is a citizen or resident of Tennessee.
No member
(Id.)
Richard
Rice, Malcolm Rice, and Schaffler are citizens of Tennessee.
(Id. ¶¶ 2-4.)
69 at 6.)
Peach seeks $9,307,134.48 in damages.
(ECF No.
The parties are completely diverse, and the amount-
in-controversy requirement is satisfied.
In a diversity action, state substantive law governs.
See
Brocklehurst v. PPG Indus., Inc., 123 F.3d 890, 894 (6th Cir.
1997)
(citing
(1938)).
Erie
R.R.
Co.
v.
Tompkins,
304
U.S.
64,
78
A federal district court is required to apply the
choice-of-law rules of the state in which it sits.
See Klaxon
Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496 (1941).
Tennessee follows the rule of lex loci contractus, which
provides that a contract is presumed to be governed by the law
of the jurisdiction in which it was executed absent a contrary
intent.
1036,
Starnes Family Office, LLC v. McCullar, 765 F.Supp.2d
1045
(W.D.
Tenn.
2011)
(citing
Vantage
Tech.,
Cross, 17 S.W.3d 637, 650 (Tenn. Ct. App. 1999).
between
the
parties
provides
that
the
law
LLC
v.
If a contract
of
another
jurisdiction governs, that provision will be honored if 1) it
was executed in good faith, 2) the jurisdiction bears a material
connection to the transaction, 3) the basis for the choice of
4
law is reasonable, and 4) the chosen jurisdiction’s law is not
contrary to a fundamental public policy of a state that has a
materially greater interest in the dispute and whose law would
otherwise apply.
Id. (citing Restatement (Second) of Conflict
of Law § 187(2) (1971)).
Each guaranty states that it “shall be governed by the laws
of the State where the lender is located.”
No. 56-4, and ECF No. 56-5 ¶ 13.)
(ECF No. 56-3, ECF
Each guaranty provides that
the lender is Coastal Bank and Trust of Florida, 125 West Romana
Street, Suite 400, Pensacola, FL 32502.
(Id.)
The choice of
Florida law is reasonable and bears a material connection to the
transactions.
There is no indication of bad faith.
Florida law
is not contrary to a fundamental public policy of Tennessee, the
other jurisdiction whose law could apply.
III.
Florida law applies.
Standard of Review
Under Federal Rule of Civil Procedure 56, the court shall
grant a party’s motion for summary judgment “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.”
Civ.
P.
56(a).
The
moving
party
can
meet
this
Fed. R.
burden
by
pointing out to the court that the non-moving party, having had
sufficient opportunity for discovery, has no evidence to support
an essential element of its case.
5
See Fed. R. Civ. P. 56(c)(1);
Asbury
v.
Teodosio,
412
F.
Appx.
786,
791
(6th
Cir.
2011)
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)).
When
confronted
with
a
properly
supported
motion
for
summary judgment, the non-moving party must set forth specific
facts showing that there is a genuine dispute for trial.
Fed. R. Civ. P. 56(c).
the
evidence
is
such
See
A genuine dispute for trial exists if
that
a
reasonable
verdict for the non-moving party.
jury
could
return
a
See Wasek v. Arrow Energy
Servs., 682 F.3d 463, 467 (6th Cir. 2012) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
party
must
“‘do
more
than
simply
show
that
metaphysical doubt as to the material facts.’”
The non-moving
there
is
some
Phelps v. State
Farm Mut. Auto. Ins. Co., 680 F.3d 725, 735 (6th Cir. 2012)
(quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S.
574,
supported
pleadings.
586
(1986)).
summary
A
judgment
party
may
motion
by
not
mere
oppose
a
reliance
properly
on
the
See Beckett v. Ford, 384 Fed. Appx. 435, 443 (6th
Cir. 2010) (citing Celotex Corp., 477 U.S. at 324).
Instead,
the non-moving party “must adduce concrete evidence on which a
reasonable
juror
could
return
a
verdict
in
[its]
favor.”
Stalbosky v. Belew, 205 F.3d 890, 895 (6th Cir. 2000) (citations
omitted); see Fed. R. Civ. P. 56(c)(1).
The court does not have
the duty to search the record for such evidence.
See Fed. R.
Civ. P. 56(c)(3); InteRoyal Corp. v. Sponseller, 889 F.2d 108,
6
111 (6th Cir. 1989).
The non-moving party has the duty to point
out specific evidence in the record that would be sufficient to
justify a jury decision in its favor.
See Fed. R. Civ. P.
56(c)(1); InteRoyal Corp., 889 F.2d at 111.
Although summary judgment must be used carefully, it “is an
integral
part
designed
to
determination
of
the
Federal
secure
of
the
every
procedural shortcut.”
Rules
just,
as
a
whole,
speedy,
action[,]
rather
and
than
which
are
inexpensive
a
disfavored
FDIC v. Jeff Miller Stables, 573 F.3d
289, 294 (6th Cir. 2009) (internal quotation marks and citations
omitted).
IV.
Analysis
Peach argues that there is no genuine dispute that the
Defendants
Richard
personally
and
Malcolm
guaranteed
Rice
argue
the
Loans
that
their
and
defaulted.
guaranties
lack
consideration and are unenforceable because they were executed
years
after
the
Loans
were
initially
made.
Even
if
the
guaranties are enforceable, the Defendants argue that there is a
genuine dispute about the amount of damages because Peach failed
to mitigate its damages.
There
is
no
merit
lacked consideration.
a
the
argument
that
the
guaranties
Under Florida law, the burden of proving
lack-of-consideration
defense.
to
defense
is
on
the
party
raising
the
Lennar Homes, Inc. v. Dorta-Duque, 972 So.2d 872, 880
7
(Fla. Dist. Ct. App. 2007).
The party raising the defense must
establish the “total lack of any consideration.”
Freitag v.
Lakes of Carriage Hills, Inc., 467 So.2d 708, 710 n.2 (Fla.
Dist. Ct. App. 1985).
Here, each guaranty states that it is
made “for good and valuable consideration,” and the Loans were
renewed on the days the Rices signed their guaranties.
56-3, ECF No. 56-4, and ECF No. 56-5 at 2.)
(ECF No.
The guaranties are
enforceable, and the Defendants are liable on them.
The
Defendants
have
waived
their
mitigation-of-damages
defense, eliminating any need for a jury to determine the amount
of
damages.
Under
Florida
law,
the
“doctrine
of
avoidable
consequences” prevents an injured party “from recovering those
damages inflicted by a wrongdoer that the injured party could
have reasonably avoided.”
System Components Corp. v. Florida
Dept. of Transp., 14 So.3d 967, 982 (Fla. 2009) (emphasis in
original).
policy
Parties may contract around the doctrine.
“favors
proposition.”
the
enforcement
of
contracts
as
a
Florida
general
Loewe v. Seagate Homes, Inc., 987 So.2d 758, 760
(Fla. Dist. Ct. App. 2008).
No court has held that Florida
public policy prohibits enforcement of a contractual waiver of
the doctrine of avoidable consequences, and at least one Florida
court has suggested the opposite.
See Associated Housing Corp.
v. Keller Bldg. Products of Jacksonville, Inc., 335 So.2d 362,
364 (Fla. App. 1976) (“There is no indication that defendant
8
waived
the
doctrine
[of
avoidable
consequences]
by
word
or
deed.”)
Each
guaranty
states
that
“[t]he
liability
of
the
Undersigned shall not be affected or impaired by . . . any delay
or lack of diligence in the enforcement of Indebtedness, or any
failure to institute proceedings.”
and ECF No. 56-5 ¶ 6.)
(ECF No. 56-3, ECF No. 56-4,
That waiver is enforceable, eliminating
the need for a jury to determine whether any delay in bringing
this action unreasonably increased the Defendants’ liability.
V.
Conclusion
There is no genuine dispute about the material facts.
The
guaranties are enforceable in accordance with their terms.
The
damages Peach seeks are based on the contracted principal of the
Loans plus interest accrued as of September 25, 2013, minus the
FMV of the foreclosed collateral.
Peach has waived its right to
seek additional interest and costs.
For the foregoing reasons,
the Motion for Summary Judgment is GRANTED, and the Defendants
are ORDERED to pay Peach damages of $9,307,134.48.
So ordered this 13th day of March, 2014.
s/ Samuel H. Mays, Jr. _____
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE
9
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