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Wells Fargo Bank, N.A. v. Quick Clean, LLC

United States District Court, S.D. Mississippi, Northern Division

December 12, 2014

WELLS FARGO BANK, N.A., Plaintiff,
v.
QUICK CLEAN, LLC, MIKE BAILEY, and ELIZABETH BAILEY, Defendants.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT [32] AND DENYING DEFENDANTS' MOTION TO DISMISS [37]

HALIL SULEYMAN OZERDEN, District Judge.

BEFORE THE COURT is a Motion for Summary Judgment [32] filed by Plaintiff Wells Fargo Bank, N.A. Also before the Court is a Motion to Dismiss [37] filed by Defendants Quick Clean, LLC, Mike Bailey, and Elizabeth Bailey. The Motions have been fully briefed. Having considered the pleadings on file, the briefs and arguments of the parties, the record, and relevant legal authorities, the Court finds that it should grant in part and deny in part Plaintiff's Motion for Summary Judgment and should deny Defendants' Motion to Dismiss.

I. BACKGROUND

Plaintiff Wells Fargo Bank, N.A. ("Plaintiff") commenced this action on August 27, 2013, to recover on an outstanding debt allegedly owed by Defendants. Plaintiff[1] extended commercial loans to Quick Clean, LLC, which were unconditionally guaranteed by Mike Bailey and Elizabeth Bailey. After Defendants defaulted on the promissory notes payable to Plaintiff, Plaintiff and Defendants consolidated Defendants' obligations into an Amended, Restated and Consolidated Promissory Note ("Promissory Note") and a Forbearance and Loan Modification Agreement ("Forbearance Agreement") (collectively referred to as "Loan Documents") for which Defendants became jointly and severally liable. Promissory Note [1-1]; Forbearance Agreement [1-2]. Pursuant to both the Promissory Note and the Forbearance Agreement, Defendants agreed that the outstanding balance of the loan along with interest and fees would become due and payable on the maturity date of November 23, 2009.

Plaintiff alleges that Defendants are in default of their respective obligations under the terms of the Loan Documents by failing to pay all outstanding indebtedness owing upon the Note's maturity. Plaintiff claims that Defendants owe $376, 457.90 under the Promissory Note as of May 30, 2014, and that interest, fees, and other costs of collection continue to accrue. Aff. of Robert Terway [34-1] at p. 3. Defendants do not dispute that they have defaulted under the terms of the Loan Documents. Rather, Defendants argue that Plaintiff's Complaint should be dismissed because the Loan Documents do not qualify as negotiable instruments subject to a six-year statute of limitations, and instead constitute contracts that are subject to a three-year statute of limitations.

II. DISCUSSION

A. Summary Judgment Standard

Summary judgment is appropriate where the "movant shows 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). The party seeking summary judgment carries the initial burden of identifying the portions of the record which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). An issue is genuine if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. Royal v. CCC & R Tres Arboles, L.L.C., 736 F.3d 396, 400 (5th Cir. 2013). A fact is "material" if its resolution in favor of one party might affect the outcome of the lawsuit under governing law. Hamilton v. Segue Software Inc., 232 F.3d 473, 477 (5th Cir. 2000).

Once the movant meets this initial burden, the nonmovant must go beyond the pleadings and designate specific facts showing a genuine issue for trial. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). The nonmoving party must present "significant probative evidence." Hamilton, 232 F.3d at 477. A party cannot defeat summary judgment with conclusory allegations, unsubstantiated assertions, or only a scintilla of evidence. Celtic Marine Corp. v. James C. Justice Companies, Inc., No. 13-30712, 2014 WL 3732647, at *4 (5th Cir. July 29, 2014). A court "must resolve all ambiguities and draw all permissible inferences in favor of the nonmoving party." Total E&P USA Inc. v. Kerr-McGee Oil and Gas Corp., 719 F.3d 424, 434 (5th Cir. 2013).

B. Defendants' Rule 12(b)(6) Motion

The Court will construe Defendants' Motion to Dismiss as filed pursuant Federal Rule of Civil Procedure 12(b)(6). Fed.R.Civ.P. 12(b)(6). "A statute of limitations may support dismissal under Rule 12(b)(6) where it is evident from the plaintiff's pleadings that the action is barred and the pleadings fail to raise some basis for tolling or the like." Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003).

C. Applicable Statutes of Limitations

The Court has subject matter jurisdiction over this case based upon diversity of citizenship. Accordingly, the applicable substantive law is Mississippi law. Capital City Ins. Co. v. Hurst, 632 F.3d 898, 902 (5th Cir. 2011). Resolution of this dispute turns on whether the Loan Documents constitute negotiable instruments subject to Mississippi's six-year statute of limitations, or whether the Loan Documents are contracts subject to the general three-year statute of limitations.[2] Mississippi law defines a negotiable instrument as

an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described ...

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