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Speed Boats of Texas, Lp, D/B/A Legand Marine Group, A Texas v. Bank of America

February 25, 2011

SPEED BOATS OF TEXAS, LP, D/B/A LEGAND MARINE GROUP, A TEXAS PARTNERSHIP, FNT FINANCIAL, LLC, A TEXAS LIMITED LIABILITY COMPANY, AND GREG CONNELL, AN INDIVIDUAL PLAINTIFF,
v.
BANK OF AMERICA, N.A., DEFENDANT.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge

MEMORANDUM OPINION

This case comes before the court on two motions. Defendant/Counter-Plaintiff Bank of America, N.A. ("Bank of America" or "the Bank") has filed a motion for summary judgment pursuant to Fed. R. Civ. P. 56. Plaintiffs/Counter-Defendants Speed Boats of Texas, LP, d/b/a Legend Marine Group, FNT Financial, LLC, and Greg Connell (collectively, "Plaintiffs") have submitted a motion to strike and a motion to compel arbitration and stay proceedings. For the reasons set forth below, Bank of America's motion is granted. Plaintiffs' motions are denied.

BACKGROUND

As a preliminary matter, we find that Plaintiffs have not submitted their response to Bank of America's statement of facts in compliance with Local Rule 56.1and Fed. R. Civ. P. 56(c)(4).*fn1 Many of Plaintiffs' responses to the Bank's facts violate Local Rule 56.1(b)(3)(B) by failing to cite to any evidence in support of their denial or by citing to portions of the record that are wholly irrelevant to the grounds asserted for denial. Nearly all of Plaintiffs' additional statements of fact suffer from a similar defect by citing to portions of an affidavit by Greg Connell ("Connell") that relate to subject matters entirely different from the statement they purport to support. Courts confronted with such deficient statements and responses are not obligated to "sift through the record" for admissible evidence that would support the responses at issue. United States v. 5443 Suffield Terrace, 607 F.3d 504, 510 (7th Cir. 2010).

Even if Plaintiffs had properly cited to the relevant portions of Connell's affidavit to support their facts, many of Connell's sworn statements do not comply with the Federal Rules of Civil Procedure in that they contain inadmissible evidence. Under Fed. R. Civ. P. 56(c)(4), any affidavit submitted to oppose a motion for summary judgment "must set out facts that would be admissible in evidence." Connell's affidavit contains a number of factual statements that are not admissible under the Federal Rules of Evidence. In paragraph 7, Connell states that an unidentified person notified him that Bank of America had let certain repurchase agreements with a third party expire in 2007. Absent any indication as to the speaker's identity, admission of that statement as evidence of the Bank's failure to renew the repurchase agreement would violate the prohibition against hearsay evidence. See Fed. R. Evid. 801(c). In paragraph 10, Connell offers an inadmissible legal conclusion regarding the authority of one of his former employees to bind Plaintiffs without any facts in support. United States v. Noel, 581 F.3d 490, 496 (7th Cir. 2009) ("lay testimony offering a legal conclusion is inadmissible because it is not helpful to the jury as required by [Federal] Rule [of Evidence] 701(b)"). Connell puts forth another legal conclusion in paragraph 14 when he states that Bank of America does not have a priority security interest in the collateral. Id. Given the number of violations of the Local Rules and the Federal Rules of Civil Procedure found in Plaintiffs' statement, we find striking the entirety of Plaintiffs' statement to be an appropriate sanction. See Bordelon v. Chicago Sch. Reform Bd. of Tr., 233 F.3d 524, 529 (7th Cir. 2000). Accordingly, we will limit our presentation of the relevant background facts to Bank of America's uncontradicted facts that are supported by admissible evidence.

On December 3, 2007, Speed Boats of Texas, LP, doing business as Legend Marine Group ("LMG"),*fn2 entered into an agreement ("Agreement") with Bank of America to finance LMG's purchase of certain boats subject to the conditions and terms of the Agreement. As part of the Agreement, LMG granted Bank of America a lien and security interest in all of LMG's property and proceeds including the boats held in inventory for sale.*fn3 The Agreement also required LMG to pay interest on the advances at rates to be established by the parties. The parties agreed that failure by the borrower or any guarantor to make a timely payment or to fulfill any promise or agreement to Bank of America constituted a default. Upon default, the Agreement permitted the Bank to demand immediate payment of all obligations under the Agreement at its option and without notice. Finally, LMG agreed to pay all costs and expenses, including reasonable attorneys fees, incurred by Bank of America in enforcing the Agreement.*fn4

At the same time LMG executed the Agreement, Connell also signed two separate guaranties in which he promised to be liable for all of LMG's debts. Connell signed one guaranty on behalf of himself and another in his capacity as sole limited partner of FNT Financial, LLC ("FNT").*fn5 FNT was the only general partner in LMG. Connell also signed a guaranty on behalf of himself.

Pursuant to the Agreement between the parties, Bank of America made periodic advances to LMG either to purchase new boats or to refinance loans for previously purchased vessels. On April 2, 2008, Bank of America made advances in the amount of $1,457, 942.76 to refinance outstanding loans with respect to seven Donzi boats that LMG had previously purchased with financing from Southwest Securities, FSB. Additionally, on April 2, 2008, Bank of America advanced an additional $728,304.16 to LMG to refinance outstanding loans for eighteen Monterey boats that LMG had purchased earlier with financing from GE Commercial Distribution Finance Corp. LMG and Connell approved both transactions by executing two Security Agreement Addenda. In each Security Addendum (one for each refinancing), Connell acknowledged his obligation to pay Bank of America the total amount financed and also recognized Bank of America's perfected security interest in the refinanced boats.

On November 24, 2008, Bank of America and LMG executed a Program Letter setting out various terms for financing Bank of America provided to LMG. The Program Letter established the rate at which the interest on the Bank's advances would accrue. The Program Letter also provided that the advances on each of the boats purchased by LMG would mature 540 days after the original invoice date for each boat. The Program Letter superceded all previous program letters and went into effect on December 1, 2008.

Bank of America sent LMG billing statements on a monthly basis. The statements included a detailed summary showing the amount financed for each boat, the date on which interest commenced for each advance, the amount of curtailment owing for each advance, the interest due on each advance, and the maturity date of each advance. After receiving Bank of America's monthly billing statements, LMG made partial payments without objection.

Despite their partial compliance with their obligations under the Agreement, LMG failed to pay back the advances and interest in full by the relevant maturity dates and defaulted on its obligations under the Agreement. Bank of America sent LMG default letters on May 26, 2009, and again on August 4, 2009. In those letters, Bank of America demanded that LMG and Guarantors immediately pay the indebtedness in full. LMG has paid off some of its debts to Bank of America but has yet to repay the full amount of the advances and interest due and owing. As of January 31, 2011, the total principal balance due is $884,877.40 and the interest accrued totals $113,548.71.

Plaintiffs filed suit against Bank of America on January 28, 2010, in the Circuit Court of Cook County. Plaintiffs assert a claim for fraudulent inducement and ask that we invalidate the agreement between the parties based on Bank of America's alleged fraud. Bank of America removed Plaintiffs' action to federal court and filed a Counterclaim requesting recovery of amounts owed against Plaintiffs and an order authorizing the sale of Plaintiffs' collateral. Bank of America now moves for summary judgment on their counterclaim and Plaintiffs' fraudulent inducement action. Additionally, Plaintiffs move to strike Bank of America's evidence submitted in support of its motion and to compel arbitration.

LEGAL STANDARD

Summary judgment is appropriate when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to summary judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue of material fact exists when the evidence is such that a reasonable jury could find for the non-movant. Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir. 1994). The movant in a motion for summary judgment bears the burden of demonstrating the absence of a genuine issue of material fact by specific citation to the record; if the party succeeds in doing so, the burden shifts to the non-movant to set forth specific facts showing that there is a genuine issue of fact for trial. Fed. R. Civ. P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). In considering motions for summary judgment, a ...


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