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Regions Bank v. Legal Outsource PA

United States District Court, M.D. Florida

January 31, 2017

Regions Bank, Plaintiff,
v.
Legal Outsource PA, Periwinkle Partners LLC, Charles Paul-Thomas Phoenix, and Lisa M. Phoenix Defendants.

          MEMORANDUM AND ORDER

          Paul A. Magnuson United States District Court Judge

         This matter is before the Court on Plaintiff's Motion for Summary Judgment. For the following reasons, the Motion is granted in part and denied in part.

         BACKGROUND

         Beginning in 2005, Defendant Legal Outsource, P.A., had a revolving line of credit of $450, 000 with Plaintiff Regions Bank, renewed on a yearly or semi-yearly basis. The loan agreement was Dated: May 30, 2013, by Legal Outsource and guaranteed by Defendant Charles Paul-Thomas Phoenix, who is also acting as counsel for all Defendants here. (Compl. Exs. A, B, D.) The 2013 loan matured in February 2014, and Legal Outsource did not pay it. On April 4, 2014, Regions demanded full payment under the loan. (Id. Ex. E.)

         In 2011, Regions lent nearly $1.7 million to Periwinkle Partners LLC, for the purchase of a shopping center on Sanibel Island. (Id. Exs. F-O.) At the time of the loan transaction, the sole member of Periwinkle Partners was a company owned by Charles Phoenix's wife, Lisa Phoenix, called the AT Phoenix Company. Charles Phoenix signed the promissory note as manager of Periwinkle. (Id. Ex. F.) Charles Phoenix, Lisa Phoenix, and Legal Outsource all provided guaranties for the Periwinkle loan. (Id. Ex. M-O.)

         Under the terms of the Periwinkle loan, a default of any other loan between the parties constituted an event of default under the Periwinkle loan. (Id. Ex. F.) After the Legal Outsource loan default, Regions declared a default of the Periwinkle loan and sought to accelerate that loan and for full payment of the loan balance. Several months later, Regions amended its default claims for the Periwinkle loan to include as events of default that the AT Phoenix Company transferred its interest in Periwinkle to a third party (1st Am. Answer Ex. 11), and that Periwinkle had failed to pay ad valorem taxes in 2013 (id. Ex. 12).

         Defendants claim that Regions decided it wanted the shopping center as collateral for the Legal Outsource line of credit, and began demanding unreasonable documentation from Defendants in 2013. They contend that the Legal Outsource credit line had been renewed yearly since 2005 with no issues, and thus that the “default” in 2014 was a manufactured default to attempt to force Defendants to collateralize the shopping center. Defendants do not contend, however, that they are not in default under the Legal Outsource loan, and cannot dispute that this default constitutes an event of default under the Periwinkle loan as well.

         The Complaint contains six counts. Count I claims breach of the Legal Outsource note, Count II claims a breach of the guaranties for the Legal Outsource loan, Count III claims breach of the Periwinkle note, Count IV claims a breach of the guaranties for the Periwinkle loan, Count V seeks a foreclosure of the Periwinkle property, and Count VI seeks a receivership.

         Defendants answered the Complaint and interposed numerous counterclaims. As relevant to Regions's Motion, Counterclaims 1, 3, 4, and 5 assert breach-of-contract, constructive fraud, breach of good faith and fair dealing, and breach of fiduciary duty on behalf of Periwinkle. Counterclaim 6 contends that Charles Phoenix's signature on the Legal Outsource loan guaranty is a forgery, and Counterclaim 7 claims constructive fraud on behalf of Charles Phoenix. Finally, Counterclaim 11 raises a claim for violation of the Equal Credit Opportunity Act on behalf of Periwinkle Partners and Lisa Phoenix.[1]

         On July 27, 2016, the Hon. John E. Steele bifurcated the forgery counterclaim (Counterclaim Count VI) from the remaining claims at issue and determined that a jury trial is available only as to the forgery counterclaim. (Docket No. 278.)

         DISCUSSION

         Summary judgment is proper only if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The Court must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Burton v. City of Belle Glade, 178 F.3d 1175, 1187 (11th Cir. 1999).

         The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. O'Ferrell v. United States, 253 F.3d 1257, 1265 (11th Cir. 2001). When opposing a motion for summary judgment, the nonmoving party must demonstrate the existence of specific facts in the record that create a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials and must do more than simply show that there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

         Defendants appear to be confused about the proper standard of review for summary judgment motions. Defendants insist repeatedly that Regions cannot rely on any fact other than what is pled in the Complaint. (E.g., Defs.' Opp'n Mem. (Docket No. 350) at 28 (“The Court should disregard ‘supposedly new factual support and look only to the factual allegations in the complaint' subject to the summary judgment motion.” (quoting Samuels v. Wilder, 871 F.2d 1346 (7th Cir. 1989)).) But the case on which Defendants rely involved allegations of fraud, which must be pled with particularity under Rule 9(b). And indeed, in Samuels, the new factual allegations were unrelated to the fraud claim as pled, leading the court to describe the plaintiff's conduct as an “attempted bypass ...


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