U.S. Bank National Association v. Cotta
Filing
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MEMORANDUM OPINION AND ORDER GRANTING 18 MOTION for Summary Judgment, denying as moot 19 MOTION to Strike 6 Answer to Complaint Plaintiff's Motion to Strike Defendant's Jury Demand MOTION to Strike 6 Answer to Complaint Plaintiff's Motion to Strike Defendant's Jury Demand(Signed by Magistrate Judge B. Janice Ellington) Parties notified.(mserpa, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
U.S. BANK NATIONAL
ASSOCIATION, et al.,
Plaintiff
VS.
FRANK COTTA,
Defendant
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C.A. NO. 11-CV-410
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
FOR SUMMARY JUDGMENT AND DENYING AS MOOT PLAINTIFF’S
MOTION TO STRIKE
Pending are plaintiff’s motion for summary judgment and its motion to strike
defendant’s jury demand (D.E. 18, 19) to which defendant did not respond. Plaintiff,
U.S. Bank National Association, holds a note executed by defendant, Frank A. Cotta, and
asserts that defendant defaulted on payment of the note and now owes plaintiff the
deficiency principal balance on the note plus interest, attorney’s fees and costs. For the
reasons stated more fully below, plaintiff’s motion for summary judgment is granted and
its motion to strike defendant’s jury demand is denied as moot.
JURISDICTION AND VENUE
This court has jurisdiction of this matter pursuant to 28 U.S.C. § 1332 because the
amount in controversy exceeds $75,000 and complete diversity of citizenship exists
among the parties. Venue is proper in this court because the defendant resides in this
district. 28 U.S.C. § 1391. All parties consented to the jurisdiction of a United States
Magistrate Judge. 28 U.S.C. § 636 and the case was reassigned to the undersigned (D.E.
13, 14).
BACKGROUND
Plaintiff in this case is U.S. Bank National Association as Trustee, on behalf of
single purpose entity 5350 South Staples Drive Holdings Limited Partnership, a Maryland
limited partnership, and as successor-in-interest to Bank of America, N.A., as Trustee,
successor-by-merger to LaSalle Bank National Association, as Trustee, for the Registered
Holders of LB-UBS Commercial Mortgage Trust 2006-C4, Commercial Mortgage PassThrough Certificates, Series 2006-C4, its successors and assigns or designees, by and
through its special servicer, CWCapital Asset Management LLC. Plaintiff is a nationally
chartered bank and is a citizen of the state of Minnesota. Defendant Frank A. Cotta is the
managing member of Cotta Property Management, LLC (“the borrower”) and is a citizen
of Texas.
On April 13, 2006 the borrower executed a promissory note in the amount of
$6,845,000.00 payable to Lehman Brothers Bank, FSB (Promissory Note, D.E. 18-2 at 112). Defendant signed the note as Guarantor on behalf of the borrower (Id.) Plaintiff
succeeded to the beneficial interest in the note. The promissory note was executed as part
of a transaction by which the borrower came to own and operate a commercial office
building known as the New York Life Building, located at 5350 South Staples Street in
Corpus Christi, Texas (“the property”). The property secured the note. As part of the
transaction, the defendant executed a Guaranty of Recourse Obligations of Borrower
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(“Guaranty”), unconditionally guaranteeing the defendant’s obligations pursuant to the
note and Deed of Trust.
Under the Guaranty, if the property became an asset in a voluntary bankruptcy or
insolvency proceeding, the defendant provided a personal and unconditional guarantee of
prompt payment to the lender (now the plaintiff herein) (Guaranty at 1-2, D.E. 18-5 at 12). In addition, the Guaranty provides that in the event of any default of the borrower
under the note, the security instrument or the other loan documents, the lender could
proceed directly and without notice against the Guarantor to collect the full amount of the
liability (Guaranty at 3; D.E. 18-5 at 3). The Guaranty also provides that if the borrower
took advantage of or became subject to any provision of the Bankruptcy Code, the
plaintiff could declare the debt due and payable and enforce any of its right and remedies
against the guarantor provided for in the Guaranty (Guaranty at 3; D.E. 18-5 at 3).
Under the Deed of Trust, an event of default occurred, among other circumstances, if the
borrower commenced any case relating to bankruptcy (Deed of Trust at 23; D.E. 18-3 at
23).
On December 5, 2011 the defendant filed a voluntary bankruptcy petition for relief
under Chapter 11 of the Bankruptcy Code in the Corpus Christi Division of the United
States Bankruptcy Court for the Southern District of Texas. In re Cotta Property
Management, LLC, Case No. 11-20706 (Vol. Pet., D.E. 18-12 at 1-6). That filing
triggered the clause in the Guaranty that allowed the lender to proceed directly and
without notice against defendant to recover the full amount of the liability under the note.
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On December 16, 2011 plaintiff notified defendant that the bankruptcy filing constituted
an event of default under the loan documents, thus accelerating the maturity of the
indebtedness and triggering liability for the remaining indebtedness under the terms of the
Guaranty. Plaintiff demanded full payment of the debt.
On April 16, 2012 the bankruptcy court granted plaintiff relief from the automatic
stay so that it could pursue its rights under the loan documents (Order, D.E. 18-13 at 1-3).
On May 1, 2012 a non-judicial foreclosure sale of the property was held and the plaintiff
purchased the property by making a credit bid of $4,840,000.00 (Aff. of Sale and Notice
of Sale, D.E. 18-14 at 1-15). Pursuant to the terms of the Deed of Trust, the credit bid
amount and other amounts held by plaintiff in reserve were applied to expenses in the
following order: (1) to the appraisal fees, environmental report fees and legal fees
incurred prior to the foreclosure sale; (2) to the unpaid late fees which accrued prior to the
sale; (3) to the unpaid interest which accrued prior to the sale; (4) to the prepayment
consideration which accrued prior to the sale and (5) to the unpaid note at the time of the
foreclosure sale (Deficiency Calc., D.E. 18-11).
As of August 31, 2012, the total deficiency principle balance due under the
Guaranty was $3,144,603.34 and the amount of accrued interest was $189,192.72.
Interest on the balance owed continues to accrue at the default rate of 18 percent annually,
or $1,550.76 per day.1
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Plaintiff claims that interest is accruing at the rate of $1,572.30 per day and that
the amount of accrued interest as of August 31, 2012 was $191,192.72. However, if
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In its motion for summary judgment, plaintiff alleges that it has presented proof of
the following: (1) it is the owner and holder of the note and Guaranty; (2) the parties had
a contract and that defendant has breached the contract; (3) plaintiff fulfilled all of its
obligations under the contract; (4) defendant breached his obligations under the contract
and caused injury; (5) defendant owes plaintiff the amount of the deficiency, plus interest
as described above; and (6) defendant owes plaintiff attorneys’ fees and expenses.
Defendant did not respond to the motion for summary judgment, but in his answer he
conceded all of the relevant facts except that plaintiff was entitled to recover expenses in
the amount of $12,639.00 or that it was entitled to a prepayment consideration of
$1,453,751.56. Defendant also asserted that plaintiff failed to mitigate its damages and
demanded a jury trial (Ans., D.E. 6).
APPLICABLE LAW
A. Summary Judgment Standard
Summary judgment is proper when 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). A party asserting that a fact either cannot be or is genuinely
disputed must support the assertion by citing to particular parts of material in the record,
or by showing that the materials cited do not establish the absence or presence of a
interest is accruing at the rate of 18% per year, $3,144,603.34 x 18 % ÷ 365 (days) =
$1,550.76, not $1,572.30. Multiplying the daily rate of $1,550.76 times 122 days (May 2,
2012 through August 31, 2012) yields a total of $189,192.72.
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genuine dispute, or that an adverse party cannot produce admissible evidence to support
the fact. FED. R. CIV. P 56(c).
An issue is material if its resolution could affect the outcome of the action. Lewis
v. University of Texas Medical Branch at Galveston, 665 F.3d 625, 630 (5th Cir. 2011)
(citing Daniels v. City of Arlington, 246 F.3d 500, 502 (5th Cir. 2001)). The Court must
examine “whether the evidence presents a sufficient disagreement to require submission
to a jury or whether it is so one-sided that one party must prevail as a matter of law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S. Ct. 2505, 2512, 91
L.Ed.2d 202 (1986). In making this determination, the Court must consider the record as
a whole by reviewing all pleadings, depositions, affidavits and admissions on file,
drawing all justifiable inferences in favor of the party opposing the motions. Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89
L.Ed.2d 538 (1986).
The Court will not weigh the evidence or evaluate the credibility of witnesses.
Caboni v. General Motors Corp., 278 F.3d 448, 451 (5th Cir. 2002). In reviewing the
evidence, “the court must disregard all evidence favorable to the moving party that the
jury is not required to believe, and should give credence to the evidence favoring the
nonmoving party as well as to the evidence supporting the moving party that is
uncontradicted and unimpeached.’” Daniels, 246 F.3d at 502 (citing Reeves v.
Sanderson Plumbing Products, Inc., 530 U.S. 133, 120 S.Ct. 2097, 147 L.Ed.2d 105
(2000)). Conclusional allegations and unsubstantiated allegations may not be relied on as
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evidence by the nonmoving party. Carnaby v. City of Houston, 636 F.3d 183, 187 (5th
Cir. 2011). Summary judgment is appropriate if a reasonable jury could not return a
verdict for the nonmoving party. Delta & Pine Land Co. v. Nationwide Agribusiness Ins.
Co., 530 F.3d 395, 399 (5th Cir. 2008)(citing Anderson, 477 U.S. at 248).
The party moving for summary judgment need not negate the elements of the
nonmovant’s case. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
Rather, the movant need only demonstrate the absence of a genuine issue of material fact.
See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L.Ed.2d 265
(1986). If the movant demonstrates there is an absence of evidence to support the
nonmovant’s case, the nonmovant must come forward with specific facts showing that
there is a genuine issue for trial. See Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356.
After the nonmovant has been given an opportunity to raise a genuine factual issue, if no
reasonable juror could find for the nonmovant, summary judgment will be granted.
Caboni, 278 F.3d at 451. Defendant presented no evidence or argument in opposition to
plaintiff’s summary judgment proof.
B. Breach of Contract
The elements of a breach of contract under Texas law are “(1) the existence of a
valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the
contract by the defendant; and (4) damages to plaintiff resulting from the breach.” Lewis
v. Bank of Am. NA, 343 F.3d 540, 544-45 (5th Cir. 2003). Plaintiff has provided
evidence on all four elements of the cause of action. Defendant conceded the first three
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elements in his answer, filed prior to the foreclosure sale, although he disagreed about the
amount owed. Defendant did not respond to the post-foreclosure sale claim made in the
motion for summary judgment that he owes $3,144,603.34, plus interest in the amount of
$190,248.50 as of August 31, 2012 and that interest continues to accrue at the rate of 18
percent annually. Nor did defendant object to the affidavit submitted by plaintiff’s
attorney that as of August 30, 2012 he had incurred fees and costs in the amount of
$21,833.18 and anticipated that he would incur more fees and costs when responding to
future pleadings and litigating the case to its conclusion.
Based on the foregoing, plaintiff’s motion for summary judgment is granted.
Judgment is entered for plaintiff in the amount of $3,144,603.34, plus interest in the
amount of $274,484.52,2 for a total of $3,420,638.62. In addition, plaintiff is awarded
attorneys fees and costs in the amount of $21,833.18.
C. Motion to Strike
Plaintiff also moved to strike defendant’s answer, insofar as he made a demand for
a jury trial. The motion was based on language in the Guaranty whereby defendant
waived “to the fullest extent permitted by law” the right to a jury trial in any law suit
related to the note or the transaction to buy the property (Guaranty at 4; D.E. 18-5 at 4).
Defendant did not respond to the motion.
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Interest in the amount of $276,035.28 was calculated by multiplying the daily rate
of $1,550.76 per day, times 178 days, which is the number of days starting on May 2,
2012 and ending on October 26, 2012, the day this judgment was signed.
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Because defendant did not respond to the motion and because it is ordered that
plaintiff’s motion for summary judgment be granted, it is further ordered that plaintiff’s
motion to strike defendant’s jury demand be denied as moot. Because no trial will be
held in this matter, there is no need to determine whether defendant made a valid waiver
of his right to a jury trial in a civil matter.
CONCLUSION
Based on the foregoing, plaintiff’s motion for summary judgment (D.E. 18) is
granted. Judgment is entered in favor of plaintiff in the principal amount of
$3,144,603.34, plus pre-judgment interest in the amount of $276,035.28, plus attorneys
fees and costs of $21,833.18, plus post-judgment interest at the prevailing rate. Plaintiff’s
motion to strike defendant’s demand for a jury trial (D.E. 19) is denied as moot, because
this case will not be proceeding to trial.
ORDERED this 26th day of October, 2012.
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B. JANICE ELLINGTON
UNITED STATES MAGISTRATE JUDGE
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