People's United Equipment Finance Corp. v. TAK, LLC et al, No. 2:2018cv11767 - Document 60 (E.D. La. 2019)
Court Description: ORDER AND REASONS - The 34 motion for a writ of seizure and 52 amended motion for a writ of seizure be and hereby are GRANTED IN PART as to Defendant ABC Crushing & Materials, LLC, and DENIED IN PART as to Defendants TAK, LLC and Bricor, LLC bec ause an automatic stay is in effect as to TAK, LLC and Bricor, LLC. A separate order and writ with respect to the seizure of collateral held by Defendant ABC Crushing & Materials, LLC will accompany this Order and Reasons. Signed by Judge Susie Morgan on 7/1/2019.(sbs)
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People&#039;s United Equipment Finance Corp. v. TAK, LLC et al Doc. 60 U N ITED S TATES D ISTRICT COU RT EASTERN D ISTRICT OF LOU ISIAN A PEOPLE’S U N ITED EQU IPMEN T FIN AN CE CORP., Pla in tiff VERSU S CIVIL ACTION TAK, LLC, ET AL., D e fe n d an ts SECTION : “E”( 1) N O. 18 -1176 7 ORD ER AN D REAS ON S Before the Court is a m otion for a writ of seizure 1 and an am ended m otion for a writ of seizure, 2 filed by Plaintiff People’s United Equipm ent Fin ance Corp. (“People’s United”). The m otion is opposed. 3 For the reasons that follow, the Court GRAN TS the m otion IN PART as to Defendant ABC Crushing & Materials, LLC (“ABC”) and D EN IES the m otion IN PART because autom atic stays are in effect as to Defendants TAK, LLC (“TAK”) and Bricor, LLC (“Bricor”). BACKGROU N D On March 24, 20 17, People’s United executed prom issory notes with Defendants ABC; 4 TAK; 5 4 Aces Transport, Inc. (“4 Aces”); 6 and Bricor (collectively, “Defendants”). 7 On the sam e day, each of the four Defendants executed a security agreem ent with People’s United in connection with the prom issory note. 8 Each security agreem ent grants People’s United a security interest in vehicles and/ or equipm ent on each Defendant’s prem ises, 1 R. Doc. 34. R. Doc. 52. 3 R. Doc. 38. 4 R. Doc. 1-11. 5 R. Doc. 1-1. 6 R. Doc. 1-5. 7 R. Doc. 1-8. 8 R. Doc. 1-1 at 3– 4; R. Doc. 1-5 at 3– 4; R. Doc. 1-8 at 3– 4; R. Doc. 1-11 at 3– 4. 2 1 Dockets.Justia.com which are described in schedules attached to the agreem ents. 9 Am ong other term s, each security agreem ent in cludes the following provision: Debtor acknowledges and agrees that in any action or proceeding brought by Secured Party to obtain possession of any Collateral, Secured Party shall be entitled to issuance of a writ or order of possession (or sim ilar legal process) without the necessity of posting a bon d, security or other undertaking which is hereby waived by Debtor. 10 On various dates, Defendants and various third parties executed guaranties for Defendants’ obligations to People’s United. 11 On Novem ber 29, 20 18, People’s United filed a com plaint in this Court alleging Defendants failed to pay their loan obligations. 12 People’s United sought to initiate executory proceedings under Louisiana law. 13 On the sam e day as the Com plaint, People’s United filed an ex parte m otion for issuance of a writ of seizure and sale, and an ex parte m otion for alternate keeper. 14 On Decem ber 26, 20 18 , the Court den ied Plaintiff’s m otions, found the Louisiana executory process procedure is not available in federal court, and ordered this m atter to proceed as an ordinary proceeding. 15 Sum m onses were served on Defendants, 16 and Defendants filed their answer. 17 On March 26, 20 19, People’s United filed its Second Am en ded Com plaint am ending the am ounts for which it alleges Defendants are liable. 18 People’s United no 9 R. Doc. 1-1 at 5– 6; R. Doc. 1-5 at 5; R. Doc. 1-8 at 5; R. Doc. 1-11 at 5. R. Doc. 1-1 at 4; R. Doc. 1-5 at 4; R. Doc. 1-8 at 4; R. Doc. 1-11 at 4. 11 R. Docs. 1-3 (guaranties for TAK’s debt), 1-3 (guaranties for 4 Aces’ debt), 1-10 (guaranties for Bricor’s debt), 1-13 (guaranties for ABC’s debt). 12 R. Doc. 1. 13 Id. 14 R. Docs. 3, 4. 15 R. Doc. 7. 16 R. Docs. 12– 15. 17 R. Doc. 23. 18 R. Doc. 33. 10 2 longer seeks recovery on the prom issory note executed by 4 Aces because 4 Aces has paid People’s United the full am ount due. 19 In its Second Am ended Com plaint, People’s United adds an allegation that, “[d]ue to cross-collateralization, Plaintiff has a security interest in certain Equipm ent and Blanket Collateral belonging to certain Defendant(s) that secures the indebtedness of other Defendant(s).”20 On April 2, 20 19, People’s United filed the instant m otion seekin g seizure an d sequestration of the collateral held by ABC, TAK, and Bricor, but not 4 Aces. 21 People’s United states its representative inspected the collateral on Defendants’ prem ises an d discovered pieces of equipm ent were m issing parts, and som e of the equipm ent had been transported out of the state. 22 Attached to the proposed order are schedules listing the equipm ent that is the subject of the request for seizure. 23 Defendants oppose. 24 Plaintiff filed a reply. 25 On April 9, 20 19, the Court ordered Defendants to file a surreply addressing whether they have waived their right to seek the furnishing of security under article 3574 of the Louisiana Code of Civil Procedure. 26 Defendants did not do so. On April 16, 20 19, the Court held a status conference with the parties. 27 The Court ordered the parties to “provide each other with journals showing all debits and credits against accounts” for which People’s United is the creditor and Defen dants are debtors. 28 The Court also ordered People’s United to file a supplem ental m em orandum addressing 19 Id. Id. 21 R. Doc. 34. 22 R. Doc. 34-1 at 3. 23 R. Doc. 34-4 at 3– 11. 24 R. Doc. 38. 25 R. Doc. 40 . 26 R. Doc. 43. 27 R. Doc. 44. 28 Id. 20 3 the requirem ent of furnishing security. 29 Plaintiff filed the supplem ental m em orandum on April 30 , 20 19. 30 On May 8, 20 19, the Court held another status conference with the parties. 31 The parties represented they were approaching agreem ent and intended to file a m otion for a consent judgm ent. 32 The Court scheduled a follow-up telephone status conference, set for May 16, 20 19. 33 At the telephone status conference, Defen dants ABC, TAK, and Bricor represented each inten ded to file for bankruptcy. 34 The Court granted People’s United leave to am end its m otion to provide an am ended proposed order and writ of seizure. 35 On May 31, 20 19, People’s United filed the instant am en ded m otion. 36 In the proposed order an d proposed writ attached to the m otion, People’s United rem oved its request for seizure of equipm ent held by Bricor. 37 On May 31, 20 19, Bricor filed a notice of bankruptcy filing. 38 On J une 4, 20 19, at a telephone status conference, counsel for TAK and ABC represented each inten ded to file for bankruptcy. 39 On J une 5, 20 19, TAK filed a notice of bankruptcy filing. 40 Under 11 U.S.C. § 362, this action is stayed as to TAK and Bricor. ABC has not filed a notice of bankruptcy filing. As a result, the Court addresses only Plaintiff’s request for sequestration of property held by ABC. The only collateral 29 Id. R. Doc. 47. 31 R. Doc. 48. 32 Id. 33 Id. 34 R. Doc. 49. 35 R. Doc. 51. 36 R. Doc. 52. 37 R. Docs. 52-2, 52-3. 38 R. Doc. 54. 39 R. Doc. 58. 40 R. Doc. 59. 30 4 People’s United requests be seized from ABC is a 20 13 J ohn Deere “4-Wd Articulated Wheel Loader Equipped W/ ,” Serial No. 1DW724KZED650 680 , Model 724K (“the Wheel Loader”). LAW AN D AN ALYSIS I. Pe o p le ’s U n ite d is n o t e n title d to s e izu re o f co lla te ral in co n n e ctio n w ith its s e cu rity agre e m e n ts w ith Brico r an d TAK. Under 11 U.S.C. § 362, a petition for bankruptcy operates as an autom atic stay of “a judicial, adm inistrative, or other action or proceeding against the debtor that was or could have been com m enced before the com m encem ent of the case under this title, or to recover a claim against the debtor that arose before the com m encem ent of the case under this title.”41 Bricor and TAK have filed for bankruptcy. 42 As a result, Plaintiff’s claims against them are stayed. People’s United is not entitled to seizure of collateral in connection with its security agreem ents with Bricor and TAK. This does not apply to ABC, which has not filed for bankruptcy. II. Pe o p le ’s U n ite d is e n title d to s e izu re o f co llate ral in co n n e ctio n w ith its s e cu rity agre e m e n t w ith ABC. Pursuant to Rule 64(a) of the Federal Rules of Civil Procedure, “[a]t the com m encem ent of and throughout an action, every rem edy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgm ent. But a federal statute governs to the extent it applies.” The rem edies available under this rule include arrest an d attachm ent. 43 Article 3571 of the Louisiana Code of Civil Procedure provides: When one claim s the ownership or right to possession of property, or a m ortgage, security interest, lien, or privilege 41 11 U.S.C. § 362(a)(1). R. Docs. 54, 59. 43 F ED . R. CIV. P. 64(b). 42 5 thereon, he m ay have the property seized under a writ of sequestration, if it is within the power of the defendant to conceal, dispose of, or waste the property or the revenues therefrom , or rem ove the property from the parish, during the penden cy of the action. 44 In Pioneer Bank & Tr. Co. v. Oechsner, the collateral for a loan consisted of “buildings, im provem ents, m achinery, equipm ent, furniture, furnishings and all other property, m ovable and im m ovable,” and revenues from the collateral, which were located on the debtor’s property. 45 The creditor m oved for sequestration under article 3571. The Louisiana Suprem e Court explained: Pioneer[, the creditor,] need not show that Oechsner[, the debtor] would conceal or waste the revenues, only that it is within his power to do so. Because of the very nature of the revenues and the fact that they are on the m ortgaged property and kept by Oechsner, it is within Oechsner's power to conceal, dispose of or waste the said revenues. Therefore we hold that, under arts. 3571 and 327, Pioneer m ay have the m ortgaged property seized under a writ of sequestration and collect the revenues produced by the property under seizure. 46 In this case, the collateral consists of the Wheel Loader. Sim ilar to Pioneer, because of the nature of the collateral, it is within ABC’s power to conceal, dispose of, or waste the Wheel Loader. As a result, the Court finds that, under article 3571, People’s United is entitled to have the Wheel Loader seized under a writ of sequestration. III. Pe o p le ’s U n ite d n e e d n o t fu rn is h s e cu rity in co n n e ctio n w ith th e s e izu re . Article 3574 of the Louisiana Code of Civil Procedure provides, “An applicant for a writ of sequestration shall furnish security for an am ount determ ined by the court to be 44 LA. CODE CIV. P ROC. art. 3571. 468 So. 2d 1164, 1166 (La. 1985). 46 Id. at 1168; see also CEF Funding, L.L.C. v. Huey , No. CV 0 9-2978, 20 0 9 WL 10 68198 6, at *2 (E.D. La. J une 2, 20 0 9) (Africk, J .) (“The party seekin g the writ of sequestration need not show that the defendants would conceal, dispose of, or waste the m ortgaged property, ‘only that it is within [defendants’] power to do so.’”) (quoting id.) 45 6 sufficient to protect the defendant against any dam age resulting from a wrongful issuance, unless security is dispensed with by law.”47 The Louisiana Suprem e Court has not directly addressed the extent to which article 3574 grants discretion to issue a writ of sequestration without security. The Court turns to the history of the writ to determ ine whether People’s United is entitled to sequestration without furnishing security. Article 273 of the 18 70 Code of Practice provided, “J udicial sequestration is generally ordered only at the request of one of the parties to a suit; there are cases, nevertheless, where it is decreed by the court without such request, or is the consequen ce of the execution of judgm ents.” Article 274 provided, “The court m ay order, ex officio, the sequestration of real property in suits, where the ownership of such property is in dispute and when on e of the contending parties does not seem to have a m ore apparent right to the possession than the other.” Article 275(8) of the Code of Practice provided, “A sequestration m ay be ordered in all cases, when one party fears that the other will conceal, part with, or dispose of the m ovable in his possession, during the penden cy of the suit, upon com plying with the requisites of the law.” In its 1939 decision in Ludw ig v. Callow ay , 48 the Louisiana Suprem e Court addressed the requirem ent of a bond in the context of articles 273 and 274 of the Code of Practice. In Ludw ig, the Louisiana Suprem e Court stated: The jurisprudence is uniform that the law vests the power in the district judge to ex proprio m otu and without bond judicially sequester property without a hearing, where, after considering all the pleadings and the facts and circum stances alleged by the parties, he is of the opinion that the en ds of justice require such action and this decision is left largely to his discretion. 49 47 LA. CODE CIV. P ROC. art. 3574. 187 So. 4 (1939). 49 Id. at 5 (collectin g cases). But see Pasley v. McConnell, 36 La. An n. 70 3, 70 4 (1884). 48 7 The Ludw ig court relied on Allen v. W hetstone, in which the Louisiana Suprem e Court held, “The fact that parties suggested or requested [sequestration] did not deprive the court of the power to order the sequestration ex-officio, under C. P. 273, without affidavit or bond.”50 The Code of Civil Procedure took effect in 1961. 51 Articles 3571– 76 govern sequestration. Article 3573 of the Code of Civil Procedure, which replaces article 274 of the Code of Practice, provides, “The court on its own m otion m ay order the sequestration of property the ownership of which is in dispute without requiring security when on e of the parties does not appear to have a better right to possession than the other.”52 In J. C. Trahan Drilling Contractor, Inc. v. Sterling, which was decided in 1964, after the Code of Civil Procedure took effect, the plaintiffs sought sequestration without bond. 53 Relying on Ludw ig, the United States Court of Appeals for the Fifth Circuit held “the allowance or disallowance of sequestration is a m atter of judicial discretion, likewise the allowance without bond.”54 The Fifth Circuit did not address the fact that sequestration was granted at the plaintiffs’ request and not on the court’s own m otion, but held that, under Louisiana law, courts have discretion to grant sequestration without bond. Although few courts have addressed the issue directly, in Joiner v. Bill Hood Ford, Inc., the Louisiana Court of Appeal for the First Circuit relied on Ludw ig and J.C. Trahan 50 35 La. Ann . 846, 849 (18 8 3). CODE CIV. P ROC. Bk. IX, Acts 1960 , No. 15. 52 LA. CODE CIV. P ROC. art. 3573. The Court notes the com m ent accom panyin g the article cites Ludw ig. LA. CODE CIV. P ROC. art. 3573 official revision cm t. 1960 . 53 335 F.2d 65, 66 (5th Cir. 1964). 54 Id. (citing Ludw ig, 187 So. At 5). 51 LA. 8 to hold the trial court had “wide latitude and discretion afforded it in ordering . . . sequestration without bond.”55 This Court holds it has discretion to grant sequestration without bond. The Court notes that the parties explicitly provided for sequestration without bond in their security agreem ent. 56 Moreover, when the Court ordered ABC to file a surreply addressing whether it had waived its right to seek the furnishing of security under article 3574 of the Louisiana Code of Civil Procedure, 57 ABC did not do so. The Court exercises its discretion to sequester property without bond. CON CLU SION For the foregoing reasons, IT IS ORD ERED that the m otion for a writ of seizure 58 and am ended m otion for a writ of seizure 59 be and hereby are GRAN TED IN PART as to Defendant ABC Crushing & Materials, LLC. IT IS FU RTH ER ORD ERED that the m otions be and hereby are D EN IED IN PART as to Defendants TAK, LLC and Bricor, LLC because an autom atic stay is in effect as to TAK, LLC and Bricor, LLC. A separate order and writ with respect to the seizure of collateral held by Defendant ABC Crushing & Materials, LLC will accompany this Order and Reasons. N e w Orle a n s , Lo u is ian a, th is 1s t d ay o f Ju ly, 2 0 19 . ________________________________ SU SIE MORGAN U N ITED S TATES D ISTRICT J U D GE 55 20 0 2-0 996 (La. App. 1 Cir. 4/ 2/ 0 3), 843 So. 2d 1147, 1151, w rit denied, 20 0 3-1231 (La. 6/ 27/ 0 3), 847 So. 2d 1267. 56 R. Doc. 1-1 at 4; R. Doc. 1-5 at 4; R. Doc. 1-8 at 4; R. Doc. 1-11 at 4. 57 R. Doc. 43. 58 R. Doc. 34. 59 R. Doc. 52. 9
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