Mack Financial Services v. Ackel

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

MACK FINANCIAL SERVICES, ET AL CIVIL ACTION

VERSUS NO. 20-2814

c/w 21-669

GEORGE L. ACKEL III, ET AL SECTION "B"(5)

ORDER AND REASONS

Before the Court is plaintiffs’ Motion for Summary Judgment

(Rec. Doc. 17). No opposition or response was filed by defendants.

For the following reasons,

IT IS ORDERED that the motion (Rec. Doc. 17) is GRANTED;

IT IS FURTHER ORDERED that the Court shall retain jurisdiction

to decide plaintiffs’ motion for attorney’s fees, provided that

the motion and supporting materials are filed within fourteen (14)

days of this order and in accordance with local rules.

FACTS OF THE CASE AND PROCEDURAL HISTORY

This suit arises from a breach of guaranty claim wherein the

defendants Fleetstar, LLC (“Fleetstar”), George J. Ackel III

(“Ackel”), and Ackel Construction Company (“Ackel

Construction”)(collectively “defendants”) allegedly failed to make

payments owed to plaintiffs Mack Financial Services, a division of

VFS US LLC (“Mack Financial”) and Volvo Financial Services, a

division of VFS US LLC (“Volvo Financial”)(collectively

“plaintiffs”). Rec. Doc. 1.

On or about August 17, 2018, Fleetstar allegedly executed a

Master Loan and Security Agreement (“Master Agreement”) in favor

of Mack Financial. Rec. Doc. 17-3 at 1. Fleetstar executed a

secured promissory note and schedule (“Schedule 001 Contract”)

through which Fleetstar borrowed the principal amount of $547,708

from Mack Financial to finance its purchase of four 2019 Mack

Pinnacle 64T Daycabs (“Schedule 001 Equipment”). Id. at 1-2.

Fleetstar allegedly agreed to repay the amount borrowed plus

interest in 60 monthly payments of $10,713.97. Id. at 2.

Accordingly, to secure the payment due under the Schedule 001

Contract, Fleetstar allegedly granted Mack Financial a security

interest in the Schedule 001 Equipment (“Schedule 001

Collateral”), which Mack Financial perfected on August 21, 2018.

Id.

On or about February 28, 2018, A & Brothers Construction

Company of Louisiana, LLC (“A & Brothers”) executed a credit sales

contract (“Schedule 003 Contract”) through which A & Brothers

borrowed the principal amount of $127,436.77 from Old River of New

Orleans, LLC (“Old River”) to finance its purchase of a 2018 Mack

GU13 truck with 2018 OX Body (“Schedule 003 Equipment”). Id. at 3.

A & Brothers allegedly agreed to repay the amount borrowed plus

interest in 72 monthly installments of $2,524.01. Id. To secure

payments due under the Schedule 003 Contract, A & Brothers

allegedly granted Old River a security interest in the Schedule

003 Equipment (“Schedule 003 Collateral”). Id.

On or about February 28, 2018, A & Brothers assigned its

rights and interests in Schedule 003 Contract and Collateral to

Mack Financial. Id. On July 10, 2018, Mack Financial perfected its

interest in the Schedule 003 Collateral. Id. On September 18, 2018,

Mack Financial further perfected its interest in the Schedule 003

Collateral by filing a UCC-1 Financing Statement with the Louisiana

Secretary of State. Id. at 3-4.

On or about April 10, 2018, A & Brothers executed a credit

sales contract (“Schedule 004 Contract”) through which A & Brothers

borrowed the principal amount of $117,369.45 from Old River to

finance its purchase of a 2018 Mack GU713 truck (“Schedule 004

Equipment”). Id. at 4. A & Brothers allegedly agreed to repay the

amount borrowed plus interest in 72 monthly payments of $2,318.47.

Id. Accordingly, to secure payments due under the Schedule 004

Contract, A & Brothers allegedly granted Old River a security

interest in the Schedule 004 Equipment (“Schedule 004

Collateral”). Id.

On that same date, Old River assigned its rights and interests

in the Schedule 004 Contract and Collateral to Mack Financial. Id.

On April 19, 2018, Mack Financial perfected its interest in the

Schedule 004 Collateral. Meanwhile, on or about June 29, 2018, A

& Brothers merged with Fleetstar, with Fleetstar being the

surviving entity. Id. at 4-5.

On or about September 5, 2018, Fleetstar executed a secured

promissory note (“Schedule 005 Contract”) through which Fleetstar

borrowed the principal amount of $335,042.94 from Volvo Financial

to finance its purchase of two 2019 Volvo VHD84F trucks with an

attached 16 ft. steep dump bed (“Schedule 005 Equipment”). Id. at

5. Fleetstar allegedly agreed to repay the amount borrowed plus

interest in 60 monthly payments of $6,579.07. Id. Accordingly,

Fleetstar allegedly granted Volvo Financial a security interest in

the Schedule 005 Equipment (“Schedule 005 Collateral”), which was

properly perfected on September 21, 2018 and September 24, 2018.

Id. at 5-6. Volvo Financial further perfected its interest in the

Schedule 005 Collateral by filing a UCC-1 Financing Statement with

the Louisiana Secretary of State on September 11, 2018. Id.

On or about August 17, 2018, defendants Ackel and Ackel

Construction executed a continuing guaranty, pursuant to which,

for acknowledged consideration, guaranteed the full, prompt and

complete payment and performance of all sums owed by Fleetstar to

Mack Financial under Schedule 001, Schedule 003, and Schedule 004

Contracts (“Continuing Guaranty 001”). Id. at 6.

On or about September 5, 2018, Ackel and Ackel Construction

likewise executed a continuing guaranty, pursuant to which, for

acknowledged consideration, guaranteed the full, prompt, and

complete payment and performance of all sums owed by Fleetstar to

Volvo Financial under Schedule 005 Contract (“Continuing Guaranty

002”). Id.

All contracts provided that Fleetstar would be in default if

it failed to pay any amount due to Mack Financial or Volvo

Financial, and upon default, the latter may, at its option, declare

all indebtedness due to it immediately due and, without notice,

demand, or legal process, take possession of the collateral. Rec.

Doc. 1 at 9.

On April 2, 2019, Fleetstar filed a voluntary petition under

Chapter 11 of Title 11 of the United States Code in the United

States Bankruptcy Court for the Eastern District of Louisiana. Id.

at 8. Subsequently, on February 5, 2020, the bankruptcy court

granted plaintiffs’ motion to lift the stay, specifically as to

the Schedule 001, Schedule 003, Schedule 004 and Schedule 005

Collateral. Id. The court’s decision to grant the motion allowed

plaintiffs to pursue the underlying collateral. Id.

In an effort to avoid judicial intervention, plaintiffs

allegedly contacted Fleetstar to see if it would voluntarily

surrender the collateral. Rec. Doc. 17-3 at 7. In response, Ackel

Construction sent plaintiffs an invoice for storage of the

collateral and informed plaintiffs that they would not turn over

the collateral until the invoice was paid. Id. Although plaintiffs

disputed liability on the invoice, they agreed to pay the purported

“storage costs” to attempt to effectuate immediate return of the

collateral. Id. at 8. Despite this agreement, plaintiffs allege

that Ackel Construction and Fleetstar did not return the collateral

and ceased further communication. Id.

On October 15, 2020, plaintiffs filed a complaint against

Ackel and Ackel Construction. Rec. Doc. 1. Plaintiffs alleged that

Fleetstar defaulted under the terms of the Schedule 001, Schedule

003, and Schedule 004 Contracts (“Mack Financial Contracts”) for

failure to pay any amount due thereunder. Id. According to

plaintiffs, as of March 30, 2021, the total balance due under the

Mack Financial Contracts was $845,915.28 plus interest and late

fees, reasonable attorney’s fees, and all costs of the proceedings.

Rec. Doc. 17-3 at 12-13.

Plaintiffs also alleged that Fleetstar defaulted under the

terms of the Schedule 005 Contract (“Volvo Financial Contract”)

for failure to remit payments due thereunder. Rec. Doc. 1 at 9.

According to plaintiffs, as of March 30, 2021, the balance due on

the Volvo Financial Contract was $349,013.84, plus interest and

late fees, reasonable attorney’s fees, and all costs of the

proceedings. Rec. Doc. 17-3 at 13.

On October 16, 2020, plaintiffs filed a motion for writ of

sequestration against Ackel and Ackel Construction, requesting

that the collateral be sequestered. Rec. Doc. 3. On November 12,

2020, this Court dismissed the motion without prejudice because

the plaintiffs failed to indicate whether the property was within

the defendants’ possession. See Rec. Doc. 8.

On April 1, 2021, plaintiffs filed a separate lawsuit against

Fleetstar based on the same contracts and collateral, seeking

recognition and enforcement of their purported security rights.

Mack Financial Services, et al v. Fleetstar, LLC, (CA 21-669), ECF

No. 1. Plaintiffs prayed that the Court’s recognition and

enforcement of their security interests would permit them to seize

the collateral which would be sold at private sale in satisfaction

of the amounts owed by leetstar. Id. at 11. On May 7, 2021, this

Court consolidated the two related actions. Rec. Doc. 18.

On April 4, 2021, plaintiffs filed the instant motion for

summary judgment against Ackel and Ackel Construction (Rec. Doc.

20), alleging that there is no genuine issue of material fact that

Fleetstar, Ackel, and Ackel Construction defaulted on the

underlying contracts and thus plaintiffs are entitled to

recognition and enforcement of their security interests in and to

the relevant collateral. Rec. Doc. 20 at 1. Defendants failed to

file any response to the motion for summary judgment.1

LAW AND ANALYSIS

A. Summary Judgment Standard

1 It appears that Fleetstar never retained counsel to represent its corporate

interests in this matter, which is strictly prohibited by the Fifth Circuit.

See Southwest Express Co. v. Interstate Commerce Comm’n, 670 F.2d 53, 55 (5th

Cir. 1982)(“A corporation can appear in a court of record only by an attorney

at law.”).

Pursuant to Federal Rule of Civil Procedure 56, summary

judgment is appropriate when “the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as

a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986) (quoting Fed. R. Civ. P. 56(c)). A genuine issue of material

fact exists if the evidence would allow a reasonable jury to return

a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248 (1986). As such, the court should view all facts

and evidence in the light most favorable to the non-moving party.

United Fire & Cas. Co. v. Hixon Bros. Inc., 453 F.3d 283, 285 (5th

Cir. 2006).

Courts are discouraged from automatically granting a motion

for summary judgment simply because it is unopposed. Skinner v.

Schlumberger Technology Corp., No. 13-03146, 2014 WL 12543925, at

*1 (W.D.La. Nov. 21, 2014). Thus, the movant is still required to

establish the absence of a genuine issue of material fact, and if

he fails to do so, the court must deny the motion, even if there

was no response. Id. (citing Hetzel v. Bethlehem Steel Corp., 50

F.3d 360, 362 n. 3(5th Cir. 1995)). Nevertheless, in the absence

of an opposition to summary judgment, the court may deem the

movant’s statement of facts as undisputed. Loeber v. Bay Tankers,

Inc., 924 F.2d 1340, 1345 (5th Cir. 1991)(per curiam), cert.

denied, 502 U.S. 819 (1991); see also Fed. R. Civ. P. 56(e).

Furthermore, “the court has no obligation to sift through the

record in search of evidence to support the nonmovant’s opposition

to the motion for summary judgment.” Morgan v. Federal Exp. Corp.,

114 F.Supp.3d 434, 437 (5th Cir. 2015)(internal quotes omitted).

B. Breach of Guaranty Claim

As provided in the underlying contracts and continuing

guaranties, the law of the state of North Carolina shall govern.

Rec. Doc. 17-5 at 4; Rec. Doc. 17-13 at 3. Under North Carolina

law, a continuing guaranty is defined as “a guaranty the object of

which is to enable the principal debtor to have credit over an

extended time and to cover successive transactions.” Amoco Oil Co.

v. Griffin, 78 N.C.App. 716, 718, 338 S.E.2d 601, 602 (1986)(citing

Hickory Novelty Co. v. Andrews, 188 N.C. 59, 123 S.E. 314 (1924)).

“A guaranty of payment is an absolute promise to pay the debt of

another if the debt is not paid by the principal debtor.” Amoco

Oil, 78 N.C.App. at 718, 338 S.E.2d at 602. In the event of a

breach of guaranty, “the creditor’s cause of action against the

guarantors is separate and independent of the obligation of the

principal debtor, and it ripens immediately upon the failure of

the principal debtor to pay the debt at maturity.” Cameron-Brown

Capital Corp. v. Spencer, 31 N.C.App. 499, 502, 229 S.E.2d 711,

712 (1976). “The creditor need not have diligently prosecuted the

principal debtor without success before seeking payment from the

guarantor of payment.” Id.

To prevail in a claim for breach of guaranty, the plaintiff

must show (1) the existence of a valid contract and (2) breach of

the terms of the contract. Poor v. Hill, 138 N.C.App. 19, 26, 530

S.E.2d 838, 843 (2000). In North Carolina, a valid contract

requires assent, mutuality of obligation, and definite terms.

Charlotte Motor Speedway, LLC v. County of Cabarrus, 230 N.C.App.

1, 7, 748 S.E.2d 171, 176 (2013).

In similar unopposed motions for summary judgment filed by

plaintiffs, courts have generally granted the requested relief

upon satisfaction that the evidence establishes the defendant’s

default and subsequent breach of continuing guaranty. VFS U.S. LLC

v. Abel Property Improvements, LLC, No. 09-1096, 2010 WL 445936

(W.D.La. Feb. 5, 2010); VFS US LLC v. Wooten, No. 3:09-CV-1880-O,

2010 WL 11570202 (N.D.Tex. Dec. 17, 2010); VFS U.S. LLC v. J & F

Excavating, Inc., No. 3:10-00810, 2011 WL 703550 (M.D.Tenn. Feb.

17, 2011); Volvo Financial Services v. Gartner, No. CIV 08-4196-

RAL, 2010 WL 1872920 (D.S.D. May 4, 2010).

Regarding the Mack Financial Contracts, plaintiffs offer

Continuing Guaranty 001 and the sworn declaration of their

Bankruptcy and Litigation Specialist Ashley Bullins, who is the

custodian of records pertaining to the Fleetstar Account. Rec.

Docs. 17-16; 17-4. By executing Continuing Guaranty 001, Ackel and

Ackel Construction jointly and severally guaranteed Fleetstar’s

full and complete performance in repaying its loans and

acknowledged plaintiffs’ right to proceed against them directly to

satisfy any outstanding obligation. Id. at 1. The Master Agreement

expressly provided that any failure by the borrower or its

guarantor to make a payment when due constitutes an “event of

default.” Rec. Doc. 17-5 at 3. As such, Bullins testifies that

Mack Financial never received any payment by Fleetstar, Ackel or

Ackel Construction and that Fleetstar defaulted under the terms of

the Master Agreement. Rec. Doc. 17-4 at 6.

The undisputed facts clearly establish that the parties

executed a valid guaranty agreement. By defaulting on the payments

owed to Mack Financial, Fleetstar breached under the terms of the

Master Agreement and triggered Ackel and Ackel Construction’s

liability for the unpaid aggregate amount of $845,915.28. Further,

Ackel and Ackel Construction’s failure to pay Mack Financial placed

them in breach of Continuing Guaranty 001. Thus, we find that no

genuine issue of material fact exists as to the breach of guaranty

claim related to the Mack Financial Contracts.

Regarding the Volvo Financial Contract, plaintiffs also offer

Continuing Guaranty 002 as well as Bullins’ declaration. Rec. Docs

17-17; 17-4. In Continuing Guaranty 002, defendants jointly and

severally guaranteed Fleestar’s full and complete repayment to

Volvo Financial. Rec. Doc. 17-17 at 1. Likewise, the guaranty

clearly sets forth defendants’ acknowledgment, as Fleestar’s

guarantors, that plaintiffs have the right to proceed against them

directly to satisfy any outstanding obligation. Id. The Volvo

Financial Contracts also provided that any failure by the borrower

or its guarantor to make a payment when due constituted “an event

of default.” Rec. Doc. 17-13 at 3. Bullins’ testimony confirms

plaintiffs’ allegation that Volvo Financial never received any

payment by Fleetstar, Ackel or Ackel Construction, and as a result,

Fleetstar defaulted under the contract’s terms. Rec. Doc. 17-4 at

7.

As it pertains to the Volvo Financial Contract, the undisputed

facts establish that the parties executed a valid guaranty

agreement. By defaulting on the payments owed to Volvo Financial,

Fleetstar breached under the terms of the Volvo Financial Contract

and triggered Ackel and Ackel Construction’s liability for the

unpaid aggregate amount of $349,013.84. Ackel and Ackel

Construction’s failure to pay Volvo Financial placed them in breach

of Continuing Guaranty 002. Therefore, no genuine issue of material

fact exists as to the breach of guaranty claim related to the Volvo

Financial Contract.

Upon review of the plaintiffs’ motion and the attached summary

judgment evidence supporting plaintiffs’ assertion that defendants

are liable for the amounts claimed, summary judgment in favor of

Mack Financial and Volvo Financial is proper. As such, plaintiffs

are entitled to the amounts owed for the default of Fleetstar as

well as attorney’s fees and costs. See Wooten, 2010 WL 11570202,

at *4 (concluding that plaintiffs may be awarded attorney’s fees

and costs as permitted by Section 6-21.2 of the North Carolina

General Statutes). Furthermore, because judgment shall be awarded

to plaintiffs to satisfy the amounts owed by defendants,

plaintiffs’ pre-consolidation writ of sequestration against

Fleetstar and all other pending motions shall be DISMISSED AS MOOT.

See Amar v. Whitley, 100 F.3d 22, 23 (5th Cir. 1996)(finding denial

of writ of sequestration to be a moot issue because prevailing

litigant was able to collect costs through other means).

New Orleans, Louisiana this 9th day of June, 2021

___________________________________

SENIOR UNITED STATES DISTRICT JUDGE