Tango Delta Financial, Inc. v. Lowe
5:19-cv-01011
W.D. Tex.Jan 16, 2020Background
- Debtor Dickinson of San Antonio (for‑profit college) filed Chapter 7; Trustee Lowe sued Cottingham‑Texas (and others) in bankruptcy adversary proceeding asserting breach of Master Promissory Notes (MPNs).
- Four MPNs (2013, 2015, Austin, Tulsa) obligating Cottingham‑Texas to repay loans; Cottingham‑Texas defaulted and stopped payments.
- Debtor previously executed TLPA/APPA agreements with ASFG that included Schedule G purporting to “endorse, assign, pledge, convey, transfer and deliver” Debtor’s “right, title and interest” in the MPNs to ASFG as security for Debtor’s obligations.
- Trustee obtained partial summary judgment against Cottingham‑Texas for $8,236,787.40 plus post‑judgment interest and attorneys’ fees; the bankruptcy court also ordered conditional payments triggered by post‑judgment discovery or appeals.
- Bankruptcy court certified the partial summary judgment as a final judgment under Rule 54(b); Appellants (ASFG and Cottingham‑Texas) appealed both the summary judgment and the Rule 54(b) certification.
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (ASFG / Cottingham‑Texas) | Held |
|---|---|---|---|
| 1–5: Standing/enforceability of MPNs | Trustee: Debtor retained enforceable rights; assignment to ASFG was a security interest and did not extinguish the estate’s right to enforce notes | Appellants: Debtor assigned/endorsed MPNs to ASFG (all right, title, interest and possession), so Trustee lacks standing/ownership to enforce notes | Affirmed: Assignment created a security interest, not an absolute transfer; Trustee may enforce MPNs and summary judgment for $8,236,787.40 is affirmed |
| 6–10: Conditional post‑judgment/appellate payment awards | Trustee: those sums fall within attorneys’ fees awarded and are proper | Appellants: conditional awards penalize appellate and post‑judgment rights, were not prayed for, and lack findings of reasonableness or success contingency | Reversed/Vacated: conditional future fee awards vacated; Trustee must seek fees later with proof and findings |
| 11: Adequate protection of ASFG’s security interest | Trustee: judgment against maker does not impair ASFG’s security interest; proceeds can be satisfied under bankruptcy supervision | ASFG: summary judgment deprived ASFG of property rights in MPNs and lacked adequate protection | Dismissed/Denied: argument waived for failure to raise below; merits—secured interest remains enforceable against proceeds; no reversal |
| 12–13: Rule 54(b) certification | Trustee: certification appropriate; no just reason for delay | Appellants: certification premature because issues subject to remaining proceedings (e.g., ASFG’s secured claim) and appellant prejudice argument | Affirmed: certification was within trial judge’s discretion; no clear error in finding no just reason for delay |
Key Cases Cited
- In re Nat’l Gypsum Co., 208 F.3d 498 (5th Cir. 2000) (standards of appellate review for bankruptcy court decisions)
- Curtiss‑Wright Corp. v. Gen. Elec. Co., 446 U.S. 1 (1980) (Rule 54(b) certification is entrusted to trial court’s discretion)
- FDIC v. Cardinal Oil Well Servicing Co., Inc., 837 F.2d 1369 (5th Cir. 1988) (suits on promissory notes suitable for summary judgment)
- Fed. Sav. & Loan Ins. v. Atkinson‑Smith, 729 F. Supp. 1130 (N.D. Tex. 1989) (disposition of note‑based claims at summary judgment)
- Student Loan Mktg. Ass’n v. Hanes, 181 F.R.D. 629 (S.D. Cal. 1998) (elements for recovery on promissory note under California law)