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Allegiance Bank of Texas v. M/V Lake Limo

United States District Court, S.D. Texas, Galveston Division

August 27, 2019

M/V LAKE LIMO, et al, Defendants.


          George C. Hanks Jr. United States District Judge

         Before the Court is the Plaintiff, Allegiance Bank's (“Allegiance”), Motion for Summary Judgment Against Ashley Ryann Caldwell (“Caldwell”). Dkt. 178. After reviewing the motion, the response, and the applicable law, the motion is GRANTED IN PART and DENIED IN PART.

         Factual background and Prior Proceedings

         Allegiance entered in to various loan agreements[1] with MVR Star Fleet, L.L.C. (“Star Fleet”), which gave Allegiance preferred ship mortgages over the Motor Vessel (“M/V”) Star Gazer, the M/V Star Cruiser, the M/V Lake Limo, and a security interest in an Office Barge and a set of Floating Docks (collectively, “the Collateral”). See Dkt. 1-1; Dkt. 1-2; Dkt. 179-1; 46 U.S.C. §§ 31301 et seq. Caldwell agreed to be jointly and severally liable as a guarantor for the loan agreements. Dkt. 178-2. Later, Star Fleet defaulted on its obligations under the agreements. Dkt. 1 at 4.

         Allegiance filed this action against Star Fleet, its guarantors, and the Collateral in rem, for the outstanding balance on the loans. Dkt. 1. The Court entered an unopposed default judgment in rem against the Collateral for the outstanding balance on the loan and ordered the seizure of the Collateral. Pursuant to the Court's order, the Collateral was then sold to third-parties at auction for $167, 000. See Dkt. 47; Dkt. 48; Dkt. 49; Dkt. 179 at 6-7.[2]

         Caldwell filed a motion to have the Collateral sale set aside on the grounds that the sales prices were lower than the fair market value of the Collateral before seizure. Dkt. 51. Following an evidentiary hearing the Court denied the motion, specifically finding that there was “no evidence of fraud in connection with the judicial sale[s], collusion, or gross inadequacy of price.” Dkt. 79; Dkt. 85. The Court also found as a matter of law that Caldwell was a guarantor on the loans entered into between Allegiance and Star Fleet. Dkt. 142. The Court's decision was affirmed by the Fifth Circuit Court of Appeals and the Clerk of the Court disbursed the proceeds from the auction in partial satisfaction of the loans. Dkt. 161; Dkt. 171.

         Allegiance has now moved for summary judgment seeking a deficiency judgment against Caldwell for the outstanding balance on the loans, pre and post judgment interest on the loans, and attorney's fees. For the reasons below, the Court grants Allegiance's motion for summary judgment in part and denies it in part.

         Standard of Review

         Summary judgment is appropriate where “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 genuine dispute of material fact exists where the “‘evidence is such that a reasonable jury could return a verdict for the nonmoving party.'” Nola Spice Designs, L.L.C. v. Haydel Enters., 783 F.3d 527, 536 (5th Cir. 2015) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). Initially, the moving party bears the burden “of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact.” E.E.O.C. v. LHC Grp., Inc., 773 F.3d 688, 694 (5th Cir. 2014) (internal quotation marks omitted). If the moving party fulfills this responsibility, the non-moving party must then “go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Celtic Marine Corp. v. James C. Justice Cos., 760 F.3d 477, 481 (5th Cir. 2014) (internal quotation marks omitted). Conclusory statements, speculation, and unsubstantiated assertions will not suffice to meet the non-movant's summary judgment burden. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1429 (5th Cir. 1996). However, all evidence will be reviewed in the light most favorable to the non-moving party and all reasonable inferences will be drawn in the non-moving party's favor. Adickes v. S.H. Kress, 398 U.S. 144, 157 (1970).


         a. Deficiency Judgment

         Under Federal law, United States district courts are empowered to enter judgments against the guarantors of a preferred ship mortgage “for any deficiency in the amount of the indebtedness secured by [a] vessel.” J. Ray McDermott & Co. v. Vessel Morning Star, 457 F.2d 815, 818 (5th Cir. 1972); 46 U.S.C. § 31325(b). A well-established process, a deficiency judgment is calculated by determining “the difference between the total outstanding obligation” on a mortgage and the “fair value” offset of any collateral sold in partial satisfaction of that loan. Bollinger & Boyd Barge Serv., Inc. v. The Motor Vessel, Captain Claude Bass, 576 F.2d 595, 598 (5th Cir. 1978) (quotations omitted). Ordinarily, “the amount realized on sale [at auction] is an automatic determination of the [fair value]” figure that is used for an offset calculation. See Walter E. Heller & Co. v. O/S Sonny V, 595 F.2d 968, 971 (5th Cir. 1979). However, this is a determination that is ultimately “left to the equitable discretion of the district court.” See id.; see J. Ray McDermott & Co., Inc., 457 F.2d at 819. Where a showing is made that there is a “probable significant disparity between the [auction] price of [any collateral sold] and its fair [market] value, ” a district court “must use the latter to determine the [deficiency].” EnSerCo, L.L.C. v. Drilling Rig Noram 253, 126 F.Supp.2d 443, 446 (S.D. Tex. 2000) (citing Walter E. Heller & Co., 595 F.2d at 971). The guiding principle being that no party should experience a “windfall” as a result of the foreclosure process. Bollinger & Boyd Barge Serv., Inc., 576 F.2d at 598. In the event a district court finds that such a disparity exists, the question of the collateral's fair market value is a genuine issue of material fact better left for trial. See EnSerCo, L.L.C., 126 F.Supp.2d at 447.

         Here, Ms. Caldwell argues that there is a significant disparity between the auction price of the Collateral and its fair market value and only the latter should be used to calculate whether any deficiency exists under this mortgage. Dkt. 179 at 10. Ms. Caldwell points out that while the Collateral sold at auction for a combined amount of $167, 000, her husband, President of Star Fleet Mark Caldwell, stated by affidavit that the Collateral had a fair-market value of “$786, 500 on the low end and $936, 500.00 on the high end” before auction. Id. at 9. The Court is unconvinced by Ms. Caldwell's arguments and finds that there is no significant disparity between the auction price of the Collateral and its fair market value. Accordingly, no genuine issues of material fact exist as to the Collateral's fair value and the Court will use the auction price of the Collateral to calculate any deficiency under this mortgage.

         Ms. Caldwell's arguments against using the auction price to calculate the deficiency judgment are a reformulation of identical arguments that she made two years ago. Specifically, in 2017 Ms. Caldwell motioned the Court to set the auction sales aside because they “were not commercially reasonable” and “were structured by Plaintiff to create an artificial deficiency.” Dkt. 51 at 1. In support of this motion, Ms. Caldwell provided identical evidence of a disparity between the sales prices of the Collateral at auction and its fair market value at the time of sale. Dkt. 51 at 3-5. In response to Ms. Caldwell's concerns, the Court held two hearings to determine the legitimacy of the auction sales. Dkt. 58; Dkt. 78. At the hearing, evidence was admitted and testimony was taken concerning the validity of the auctions from Mark Caldwell and Bill Holbert, Senior Vice President of Allegiance. Dkt. 58. After due consideration of the live testimony and the evidence in the record, the Court ...

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