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Nextgear Capital, Inc. v. Bank of Springfield

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

June 19, 2019

NEXTGEAR CAPITAL, INC., Plaintiff,
v.
BANK OF SPRINGFIELD, Defendant.

          MEMORANDUM AND ORDER

          NOELLE C. COLLINS, UNITED STATES MAGISTRATE JUDGE.

         This matter is before the Court on Defendant Bank of Springfield's Motion to Dismiss Second Amended Complaint (Doc. 21). The Motion is fully briefed and ready for disposition. The parties have consented to the jurisdiction of the undersigned United States Magistrate Judge pursuant to Title 28 U.S.C. § 636(c) (Doc. 9). For the following reasons, Defendant's Motion will be GRANTED.

         I. Legal Standard

         Federal Rule of Civil Procedure 8(a)(2) requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Federal Rule of Civil Procedure 12(b)(6) provides for a motion to dismiss based on the “failure to state a claim upon which relief can be granted.” To survive a motion to dismiss a complaint must show “‘that the pleader is entitled to relief,' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to defeat a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678. (citation omitted). The pleading standard of Rule 8 “does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). “When ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007). All reasonable references from the complaint must be drawn in favor of the nonmoving party. Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 1999).

         II. Background

         Gateway Buick GMC, Inc. d/b/a Gateway Buick GMC (“Gateway”) operated an automotive dealership in Hazelwood, Missouri (“Dealership”) engaged in the business of selling new Buick and GMC vehicles until May 2018 (Doc. 19 at ¶¶5, 6). Defendant Bank of Springfield (“BOS”) provided financing to Gateway pursuant to the following promissory notes (collectively “BOS Notes”):

1) Promissory note dated August 11, 2015 in the original principal amount of $10, 000, 000.00 (Doc. 19-1);
2) Promissory note dated September 29, 2015 evidencing a revolving line of credit with a credit limit of $3, 125, 000.00 (Doc. 19-2); and
3) Promissory note dated January 12, 2016 evidencing a revolving line of credit with a credit limit of $500, 000.00 (Doc. 19-3).

(Doc. 19 at ¶7). The BOS Notes are secured by a deed of trust on the Dealership and a Commercial Security Agreement and UCC filing (Doc. 19 at ¶8).

         Plaintiff NextGear Capital, Inc. (“NextGear”) provided floor plan financing to Gateway pursuant to a Demand Promissory Note and Loan and Security Agreement dated October 27, 2014 (the “Floorplan Note”) (Doc. 19-7 (“Demand Promissory Note and Loan Security Agreement”); Doc. 19 at ¶9). In the Floorplan Note, Gateway granted NextGear a security interest in all of its assets and properties wherever located, including, without limitation, all equipment of any kind; all vehicles, vehicle parts and inventory then owned or thereafter acquired; purchase money inventory, the purchase of which was financed or floor planned by NextGear for Gateway, of whatever kind or nature, and all returns, repossessions, exchanges, substitutions, attachments, additions, accessions, accessories, replacements, and proceeds thereof; all accounts receivable, chattel paper, and general intangibles then owned or thereafter acquired by Gateway, together with the proceeds thereof; and all of Gateway's documents, books and records relating to the foregoing (the “Collateral”) (Doc. 19 at ¶9; Doc. 19-7). NextGear held a senior lien position in the accounts receivable of Gateway including all funds Gateway received from General Motors (Doc. 19 at ¶10).

         On October 1, 2015, Gateway, NextGear and BOS entered into a Subordination Agreement (Doc. 19-8 (“Security Interest Subordination Agreement”);Doc. 19 at ¶11). Pursuant to the terms of the Subordination Agreement NextGear agreed to subordinate “all of [Gateway's] open accounts with General Motors that are now or may in the future be owed to [Gateway] to General Motors (“GM Open Accounts Receivable”), except to the extent, if any, that such GM Open Accounts Receivable constitute proceeds of specific vehicles floor planned for [Gateway] by [NextGear] and for which [NextGear] remains unpaid in whole or in part” (Doc. 19-8; Doc. 19 at ¶¶12, 13). Pursuant to the Subordination Agreement, NextGear subordinated its senior lien position in payments from General Motors that were not proceeds from vehicles specifically floor planned by NextGear (Doc. 19 at ¶14). Gateway received at least two types of payments from General Motors: (a) vehicle rebates and holdbacks that constituted proceeds from vehicles directly floorplanned by NextGear (“NextGear Vehicle Funds”); and (b) various dealer incentive payments in which NextGear agreed to subordinate its lien priority pursuant to the Subordination Agreement (Doc. 19 at ¶15).

         On May 27, 2016, NextGear and Gateway entered into a Forbearance Agreement (Doc. 19 at ¶16). The Forbearance Agreement was necessitated by Gateway's failure to remit payment for vehicles Gateway sold subject to the Floorplan Note (Doc. 19 at ¶16). On July 10, 2017, NextGear and Gateway entered into an Amended and Restated Forbearance Agreement which acknowledged further defaults by Gateway under the Floorplan Note (Doc. 19-9 (“Amended and Restated Forbearance Agreement”); Doc. 19 at ¶17). Section 3C of the Amended and Restated Forbearance Agreement prohibits Gateway from obtaining any additional loan advances from BOS (Doc. 19-9; Doc. 19 at ¶19). BOS had knowledge of the Forbearance Agreement and the Amended and Restated Forbearance Agreement (Doc. 19 at ¶18).

         Beginning in May 2016, by virtue of its continuing and ongoing action selling vehicles out of trust under the Floorplan Note, Gateway was in default under the Floorplan Note and the BOS Notes (Doc. 19 at ¶21). Plaintiff had risk managers on site at Gateway, on a weekly basis, since early 2017 to prevent further out of trust sales and proper application of ...


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