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Radiance Capital Receivables Eighteen, LLC v. MBO Investments, LLC

United States District Court, E.D. Missouri, Eastern Division

January 25, 2019

MBO INVESTMENTS, LLC, et al., Defendants.



         This matter comes before the Court on the motion for summary judgment filed by Defendants MBO Investments, LLC, (“MBO”), Owen & Sons Development Co., (“Owen & Sons”), Marc A. Owen, Jacqueline Owen, Bryan K. Owen, and Mary Beth Owen (together with Owen & Sons, the “Guarantors”) (collectively, “Defendants”), (Doc. 97), and the cross motion for summary judgment filed by Plaintiff Radiance Capital Receivables Eighteen, LLC, (“Radiance” or “Plaintiff”) (Doc. 101). Also before the Court is Defendants' motion to strike portions of the affidavit of Jody Burleigh, along with various exhibits and corresponding statement of material facts submitted by Radiance. (Doc. 112). The parties have consented to the jurisdiction of the undersigned United States Magistrate Judge pursuant to 28 U.S.C. § 636(c)(1). (Doc. 29). For the following reasons, the Court will grant Plaintiff's cross motion for summary judgment, and will deny Defendants' motion for summary judgment, as well as their motion to strike.

         I. Factual and Procedural Background

         Plaintiff Radiance seeks payment from Defendants on Promissory Note #71484086-23460[1](“Note” or “Loan Number 23460”), evidencing a loan made by Premier Bank (“Premier Bank”) to MBO. The Note was originated on July 21, 2005, in the amount of $1, 799, 210.26, and was renewed several times thereafter. Prior to that, at various times in 2004 and 2005, each of the Guarantors executed commercial guaranties (“Guaranties”) in favor of Premier Bank guaranteeing MBO's debt. The Note was secured by multiple lots of real estate owned by MBO, including one lot located at Mennemeyer Road in Lincoln County, Missouri, (“Mennemeyer Property”), which was subject to a Real Estate Deed of Trust[2] (“Deed of Trust”) in favor of Premier Bank. According to Premier Bank records, [3] Premier Bank moved the Note to non-accrual status[4] on March 31, 2010. On July 13, 2010, Premier Bank authorized a short sale of the Mennemeyer Property, and the proceeds of the sale, $505, 599.88, were applied to a partial principal pay-down of the defaulted Note.

         Premier Bank failed on October 15, 2010, and the Missouri Division of Finance shut it down, at which time the Federal Deposit Insurance Corporation (the “FDIC”) was appointed as Premier Bank's receiver.[5] At that time, Providence Bank of Columbia, Missouri, assumed Premier Bank's deposits, but the FDIC retained certain Premier Bank assets, including the Note and Guaranties at issue here. CADC/RADC Venture 2011-1, LLC, (“CADC”), an entity organized by the FIDC, was the successor by assignment from the FDIC.[6] The FDIC executed an allonge to the Note in favor of CADC on August 24, 2011, providing for the Note's payment “to the order of CADC . . . without recourse and without representation or warranty.” Pursuant to a Loan Sale Agreement (“Loan Sale Agreement”), Bill of Sale and Amended Bill of Sale, executed in May 2016, Radiance purchased, as part of a bulk loan sale, the debt obligations of MBO from CADC, along with original records related to the debt, including the Note and Guaranties. Further facts will be discussed as they become relevant throughout the remainder of this memorandum and order.

         On October 20, 2017, Plaintiff filed its Second Amended Complaint against MBO to enforce the Note and against the Guarantors to enforce the Guaranties. Plaintiff brings the following counts: Count I-Breach of Contract of Promissory Note (against MBO); Count II- Breach of Commercial Guaranty (against Owen & Sons); Count III-Breach of Commercial Guaranty (against Marc A. Owen); Count IV-Breach of Commercial Guaranty (against Jacqueline Owen); Count V-Breach of Commercial Guaranty (against Bryan K. Owen); Count VI-Breach of Commercial Guaranty (against Mary Beth Owen); and, Count VII-Quantum Meruit (against all Defendants). (Doc. 50).

         Plaintiff and Defendants filed the instant cross motions for summary judgment on August 24, 2018. (Docs. 97 and 101). The parties each filed Responses in Opposition to the Motions, Replies, and Sur-Replies. (Docs. 115, 118, 121, 124, 134, and 139). Lastly, on August 24, 2018, Defendants filed their motion to strike portions of Plaintiff's statement of material facts, Plaintiff's Exhibits A, B, C, D, and F as well as portions of E, and the Affidavit of Jody Burleigh. (Doc. 112).

         II. Legal Standard

         Summary judgment shall be granted “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); Hill v. Walker, 737 F.3d 1209, 1216 (8th Cir. 2013). The movant “bears the initial responsibility of informing the district court of the basis for its motion” and must identify “those portions of [the record] . . . which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant does so, the nonmovant must respond by submitting evidentiary materials that set out specific facts showing that there is a genuine issue for trial. Id. at 324. “On a motion for summary judgment, ‘facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts.'” Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (quoting Scott v. Harris, 550 U.S. 372, 380 (2007)) (internal quotations omitted).

         “[T]he filing of cross motions for summary judgment does not necessarily indicate that there is no dispute as to a material fact, or have the effect of submitting the cause to a plenary determination on the merits.” Wermager v. Cormorant Township Bd., 716 F.2d 1211, 1214 (8th Cir. 1983). In determining the appropriateness of summary judgment, “the relevant inquiry is 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.” Bingaman v. Kansas City Power & Light Co., 1 F.3d 976, 980 (10th Cir. 1993) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

         III. Discussion

         A. Parties' Arguments

         Plaintiff asserts that it is entitled to summary judgment on all counts of its second amended complaint because it has made a prima facie case on enforcement of the Note and Guaranties, and Defendants have established no viable defenses. Defendants, in their response to Plaintiff's motion for summary judgment and in their own cross motion for summary judgment, argue that Radiance does not have standing to sue because it cannot prove by competent evidence that the Note and Guaranties were assigned to it, and that even if Plaintiff has standing to enforce the Note, Plaintiff cannot prove that the Note at issue was part of the bulk loan sale pursuant to which Plaintiff purchased certain assets formerly belonging to Premier Bank. Finally, Defendants argue that even if this Note was among the assets purchased by Plaintiff, the Note was cancelled or extinguished by Premier Bank, leaving no amount due and owing.

         B. Motion to Strike

         The Court will first address Defendants' motion to strike, pursuant to which Defendants seek to strike most of the evidence submitted by Plaintiff in support of its motion for summary judgment, as well as the corresponding paragraphs in its accompanying statement of material uncontroverted facts. Radiance submitted the affidavit of Jody Burleigh, the Senior Portfolio Manager and custodian of records for Radiance. Ms. Burleigh's affidavit purported to authenticate certain exhibits submitted by Radiance in support of their motion for summary judgment. Defendants move to strike all save one paragraph of Ms. Burleigh's affidavit, arguing that it is inconsistent with her prior testimony, and that she lacks the necessary knowledge to authenticate the documents referred to in the affidavit. Defendants also seek to strike Radiance's Exhibits A, B, C, D, and F, as well as paragraphs 31-32 and 37-54 of Plaintiff's Statement of Uncontroverted Material Facts, all of which draw information from those Exhibits. Defendants allege that these documents do not satisfy the authentication or hearsay foundational requirements.

         Rule 12(f) of the Federal Rules of Civil Procedure provides that a “court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). “A motion to strike is properly directed only to material contained in pleadings.” Khamis v. Bd. of Regents, Se. Mo. State Univ., No. 1:09-CV-145-RWS, 2010 WL 1936228, at *1 (E.D. Mo. May 13, 2013) (quoting Mecklenburg Farm, Inc. v. Anheuser-Busch, Inc., No. 4:07-CV-1719-CAS, 2008 WL 2518561, at *1 (E.D. Mo. June 19, 2008)). Rule 7(a) defines “pleadings” as a complaint, an answer to a complaint, an answer to a counterclaim, an answer to a crossclaim, a third-party complaint, and if the court orders one, a reply to an answer.” Fed.R.Civ.P. 7(a). The affidavit, exhibits, and statement of facts that Defendants seek to strike are not pleadings, and courts in this district have generally not permitted parties to attack such non-pleadings through motions to strike. See, e.g., Shea v. Peoples Nat. Bank, No. 4;11-CV-1415-CAS, 2013 WL 74374, at *1 and *2, (E.D. Mo. Jan. 7, 2013) (citing cases); Khamis, 2010 WL 1936228, at *1 (the document attached to the memorandum in opposition “is not a pleading and cannot be attacked with a motion to strike”); see also Milk Drivers Local Union No. 387 v. Roberts Dairy, 219 F.R.D. 151, 152 (S.D. Iowa 2003) (“Pleadings include complaints, answers, replies to counterclaims, answer to cross-claims, third-party complaints, and third-party answers. Therefore, a motion to strike a motion for summary judgment is inappropriate and should be denied.”) (internal citations omitted; collecting cases). Thus, the Court will deny Defendants' motion to strike portions of Ms. Burleigh's affidavit and accompanying documents and exhibits, as these documents are not pleadings.

         However, Defendants correctly note that under Fed.R.Civ.P. 56(c)(4), “[a]n affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Fed.R.Civ.P. 56(c)(4). Thus, in ruling on the parties' summary judgment motions, the Court will not consider any portions of the affidavit that are not based on personal knowledge or that contain inadmissible evidence. See, e.g., Khamis, 2010 WL 1936228, at *1). The Court also will not consider information found in the exhibits if it constitutes hearsay or is otherwise inadmissible. However, as further discussed below, the Court finds the documents on which it will rely in deciding these motions, including the affidavit and certain relevant exhibits, to be properly authenticated and otherwise admissible.

         The Court will first address Defendants' assertion that Ms. Burleigh's affidavit should not be considered by the Court because it conflicts with her prior deposition testimony. Plaintiff argues, and the Court agrees, that her deposition testimony is not actually inconsistent with her prior testimony when examined within the context of the entire sequence of deposition questions and answers. Further, any apparent inconsistencies are explained by the fact that her deposition was taken before Defendants produced certain documents during discovery, and Plaintiff submitted a supplemental affidavit that explains this and that clarifies any seeming inconsistencies. Defendants argue that it is somehow unfair for the Court to consider the supplemental affidavit. However, Courts have broad discretion to allow the introduction of evidence at the summary judgment stage, and routinely permit the submission of supplemental affidavits such as the one at issue here. See Jain v. CVS Pharmacy, Inc., 779 F.3d 753, 758 (8th Cir. 2015) (“District courts enjoy ‘wide discretion in ruling on the admissibility of proffered evidence'” on a motion for summary judgment.) (quoting U.S. Salt, Inc. v. Broken Arrow, Inc., 563 F.3d 687, 689 (8th Cir. 2009)); see also DG & G, Inc., v. Flexsol Packaging Corp. of Pompano Beach, 576 F.3d 820, 826 (8th Cir. 2009) (A district court has “broad discretion” in permitting a movant to supplement an affidavit to cure any defects). The Court will therefore consider Ms. Burleigh's supplemental affidavit as part of the record on summary judgment.

         Aside from the affidavit of Ms. Burleigh, the documents to which Defendants object can be grouped into three general categories: (1) documents submitted during discovery by the FDIC; (2) documents produced by Defendants during discovery; and (3) business records kept by Radiance in the ordinary course of business and authenticated by Ms. Burleigh in her affidavit.

         i. Documents Submitted by FDIC

         As to documents submitted by the FDIC, there can be no dispute as to their admissibility. During a discovery conference held in the chambers of the undersigned on May 21, 2018, the parties agreed, as reflected in this Court's order issued the next day (Doc. 77), that the authenticity and admissibility of any documents produced by the FDIC during discovery would not be disputed during the course of this litigation. Accordingly, the Court may consider them when deciding these motions.

         ii. Documents Produced by ...

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