Court Opinion

ID: 4212040
Source: CourtListenerOpinion
Date Created: 2017-10-17 00:00:58.151404+00
Date Added: 2024-06-11T14:41:02.351130
License: Public Domain

Case: 17-60182      Document: 00514197046         Page: 1    Date Filed: 10/16/2017

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                             United States Court of Appeals
                                                                                      Fifth Circuit

                                                                                    FILED
                                    No. 17-60182                             October 16, 2017
                                  Summary Calendar
                                                                               Lyle W. Cayce
                                                                                    Clerk
EDWARDS FAMILY PARTNERSHIP, L.P.; BEHER HOLDINGS TRUST,

              Plaintiffs - Appellants

v.

BANCORPSOUTH BANK,

              Defendant - Appellee

                   Appeal from the United States District Court
                     for the Southern District of Mississippi
                             USDC No. 3:14-CV-964

Before STEWART, Chief Judge, and ELROD and HIGGINSON, Circuit
Judges.
PER CURIAM:*
       Plaintiffs-Appellants Edwards Family Partnership, L.P. and Beher
Holdings Trust (the “Edwards Entities”) filed suit against Defendant-Appellee
BancorpSouth Bank (the “Bank”) alleging breach of contract, negligence,

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
     Case: 17-60182         Document: 00514197046             Page: 2      Date Filed: 10/16/2017

                                          No. 17-60182
breach of fiduciary duties, and fraudulent concealment. The Bank moved for
summary judgment, which the district court granted. We AFFIRM.
                                                  I.
       Baltimore physician Dr. Charles Edwards, acting through various
companies he controlled, including the Edwards Entities, loaned substantial
sums of money to Community Home Financial Services, Inc. (“CHFS”). CHFS,
which is not a party to this lawsuit, was in the business of servicing second
mortgage loans and held deposit accounts with the Bank, including the
disputed account ending in -3644. With respect to account -3644, the Bank
entered into a 2003 Blocked Account Agreement (“BAA”) 1 with CHFS and its
previous lender, Roy Al Finance and Loan Company (“Roy Al”). The BAA
allegedly tasked the Bank with restricting the way CHFS could transfer
deposited funds. 2 The Edwards Entities were not a party to this agreement.

       1 A BAA is a tripartite agreement between a borrower, a lender, and a bank that allows a
secured party to create and perfect a security interest in a debtor’s deposit account. Recognized under
Article 9 of the Uniform Commercial Code, BAAs vary depending on the particular needs of the
borrowers and lenders.

       2  The Edwards Entities assert that two provisions of the BAA are particularly relevant to the
instant litigation. First, in paragraph six, the Bank agreed that

       The Lender [Roy Al] shall have the full and exclusive interest and control of and the
       irrevocable right, power and authority to demand, collect, withdraw, receipt for or sue
       for all amounts due, to become due and payable under each Blocked Account and, in
       the Lender’s sole discretion, to take any other action, including the transfer of any
       Blocked Account to the Lender’s own name, which the Lender deems necessary or
       appropriate to preserve or protect the security interests of the Lender, for the benefit
       of the Lender, in any Blocked Account.

Second, under paragraph seven,

       The Bank [BancorpSouth] or the Borrower [CHFS], as applicable, further agree[d] that
       (subject to the provision of Section 6) at all times it will make distributions from each
       Blocked Account only to the Concentration Account, for the benefit of the Lender in
       accordance with Section 3 hereof or as specifically otherwise directed by the Lender in
       writing.

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                                  No. 17-60182
      In 2006, Rainbow Group, Ltd. (“Rainbow”), another entity controlled by
Dr. Edwards, financed the payoff of CHFS’s debt to Roy Al and became CHFS’s
lender for additional advances under a Loan and Security Agreement. Roy Al
executed an agreement purporting to “assign” to Rainbow “its right, title and
interest in” the BAA related to bank account -3644, although the Bank contests
the validity of this assignment. When Rainbow became the lender, it brought
Dr. Edwards and the Edwards Entities into the picture. The Edwards Entities
contend that, because of the way certain interests were shared and transferred
from Rainbow to them, they may enforce the 2003 BAA against the Bank even
though they were not an original party to the agreement.
      In 2007, CHFS began deviating from the BAA by making transfers out
of account -3644 to a number of bank accounts other than the “Concentration
Account” specifically identified in the BAA.        Nevertheless, Dr. Edwards
approved this conduct because the transfers were made to the Edwards
Entities or to legitimate CHFS accounts, and because CHFS always paid down
the loan. In 2010, however, CHFS ceased making payments. Consequently,
in 2011, Dr. Edwards asked CHFS to “reinstate” the BAA and “make
arrangements for all CHFS loan funds to be deposited . . . for the sole credit of
[the Edwards Entities].”
      By 2012, CHFS owed the Edwards Entities approximately $30,000,000,
and CHFS had fallen far behind in its payments. The Edwards Entities made
demand on CHFS to cure the defaults, and litigation between the parties began
shortly thereafter. CHFS subsequently filed for bankruptcy protection and
became a debtor in possession.
                                        II.
      In 2014, the Edwards Entities filed suit against the Bank in federal
district court, alleging (1) breach of contract(s), (2) negligence in breaching its
duties of good faith and ordinary care under the contract(s), (3) breach of the
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                                       No. 17-60182
fiduciary duties imposed by the contract(s), and (4) fraudulent concealment of
breach. In response, the Bank filed three motions for summary judgment.
Relevant here is the second motion, wherein the Bank advanced three
dispositive legal theories: abandonment/waiver, statute of limitations, and
mitigation. 3
       The district court held that the Edwards Entities abandoned/waived any
right they may have had to enforce the BAA and denied the other two defenses
as moot. According to the court, assuming arguendo that the BAA gave the
Edwards Entities a “known right . . . whereby [the Bank] would monitor and
prohibit unapproved -3644 transfers to accounts other than the Concentration
Account,” the Bank “establish[ed] beyond peradventure” that the Edwards
Entities “had sufficient information to be on notice that the Bank was deviating
from its contractual obligation to monitor and prohibit certain -3644 transfers”
and “failed to insist on this right or acted inconsistently with it.” Edwards
Family P’ship, L.P. v. BancorpSouth Bank, No. 3:14CV964, 2017 WL 1732709,
at *5 (S.D. Miss. Feb. 21, 2017) (internal quotation marks omitted); see also
Upchurch Plumbing, Inc. v. Greenwood Utils. Comm’n, 964 So. 2d 1100, 1112
(Miss. 2007) (citations omitted).             Thus, because the Edwards Entities
“acquiesced to a sustained deviation from their contractual rights,” they
abandoned their right to enforce the contract, and summary judgment was
appropriate. Edwards, 2017 WL 1732709 at *1.
       On appeal, the Edwards Entities assert that the district court’s grant of
summary judgment was improper. They argue, inter alia, that: (1) their claims
are not barred by the statute of limitations due to the continuing violation
doctrine; (2) the district court “refused to give weight to evidence” suggesting

       3  Because the Edwards Entities’ second summary judgment motion was ultimately granted,
the district court denied the remaining motions as moot.
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                                 No. 17-60182
that Dr. Edwards was not on sufficient notice of the contract deviations; (3)
they pled facts supporting that the deviations were not sufficiently material to
support abandonment; and (4) the district court erroneously “fail[ed] to give
any consideration to the contractual provisions for termination.”
                                      III.
      “We review a district court’s grant of summary judgment de novo,
applying the same standards as the district court.” Antoine v. First Student,
Inc., 713 F.3d 824, 830 (5th Cir. 2013).
      After considering the parties’ arguments as briefed on appeal, and after
reviewing the record, the applicable law, and the district court’s judgment and
reasoning, we AFFIRM the district court’s judgment as to the Bank’s second
summary judgment motion and adopt its analysis in full.

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