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SFG Commercial Aircraft Leasing, Inc. v. Montgomery Equipment Company Inc.

United States District Court, N.D. Indiana, South Bend Division

January 16, 2018



         This matter is before the Court on the “Plaintiff's Motion for Summary Judgment, ” filed by the plaintiff, SFG Commercial Aircraft Leasing, Inc., on December 30, 2016 (DE #42) and the “Plaintiff's Motion to Dismiss Defendant Paradise Airways Corp., ” filed by the plaintiff, SFG Commercial Aircraft Leasing, Inc., on March 21, 2017 (DE #47). For the reasons set forth below, the motion for summary judgment (DE #42) is GRANTED. The Court ORDERS SFG Commercial Aircraft Leasing, Inc. to submit proposed forms of judgment, consistent with this Court's findings, by January 30, 2018. In addition, the motion to dismiss (DE #47) is GRANTED, and the claims against Paradise Airways Corp. are hereby DISMISSED without prejudice.


         The original plaintiff, 1st Source Bank (“1st Source”), filed a complaint based on diversity jurisdiction against the defendants, Montgomery Equipment Company, Inc. (“Montgomery”), Dr. A. Thomas Falbo (“Dr. Falbo”), Paradise Airways Corp. (“Paradise”), and Spectra Jet, Inc. (“Spectra Jet”), on July 27, 2015. (DE #1.) The complaint, which describes a financing arrangement provided by 1st Source to Montgomery, alleges that Montgomery defaulted on the loan and that Dr. Falbo, who personally guaranteed Montgomery's loan obligations, has failed to pay as required by his guarantee. (Id. at 2-3.) On August 20, 2015, Spectra Jet was dismissed from the lawsuit without prejudice. (DE #8.) Montgomery and Dr. Falbo filed answers on September 29, 2015. (DE #13 & DE #14.) 1st Source requested an entry of default against Paradise on October 1, 2015, and the Clerk entered the default on October 6, 2015. (DE #15 & DE #16.) On December 9, 2015, 1st Source filed a motion to substitute SFG Commercial Aircraft Leasing, Inc. (“SFG”) as the party plaintiff in this case because it is the successor in interest to 1st Source. (DE #23.) The motion was granted, 1st Source was terminated, and SFG was added as the proper plaintiff. (DE #26.) Discovery in this case closed on August 29, 2016. (See DE #34.) SFG filed the instant motion for summary judgment on December 30, 2016. (DE #42.) Montgomery and Dr. Falbo filed a joint response on January 27, 2017. (DE #45.) SFG filed its reply on February 8, 2017. (DE #46.) SFG filed the instant motion to dismiss Paradise from the action on March 21, 2017. (DE #47.) Neither Montgomery nor Dr. Falbo have filed a response to the motion to dismiss. Thus, both motions are now ripe for adjudication.


         Motion for Summary Judgment Standard

         Summary judgment must be granted when “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). A genuine dispute of material fact exists when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Not every dispute between the parties makes summary judgment inappropriate; “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Id. In determining whether summary judgment is appropriate, the deciding court must construe all facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Ogden v. Atterholt, 606 F.3d 355, 358 (7th Cir. 2010). “However, our favor toward the nonmoving party does not extend to drawing inferences that are supported by only speculation or conjecture.” Fitzgerald v. Santoro, 707 F.3d 725, 730 (7th Cir. 2013) (citing Harper v. C.R. Eng., Inc., 687 F.3d 297, 306 (7th Cir. 2012)). A party opposing a properly supported summary judgment motion may not rely on allegations or denials in her own pleading, but rather must “marshal and present the court with the evidence she contends will prove her case.” Goodman v. Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010). If the non-moving party fails to establish the existence of an essential element on which he or she bears the burden of proof at trial, summary judgment is proper. Massey v. Johnson, 457 F.3d 711, 716 (7th Cir. 2006).

         Non-compliance with local summary judgment rules may warrant a penalty -- the court is within its discretion to ignore facts a litigant has proposed that are not submitted in compliance with those rules. See Cichon v. Exelon Generation Co., L.L.C., 401 F.3d 803, 809-10 (7th Cir. 2005). In this district, Local Rule 56-1 mandates that the moving party must include a “Statement of Material Facts” in its supporting brief and that a party opposing a summary judgment motion must file a response brief (or appendix) that includes “a section labeled ‘Statement of Genuine Disputes' that identifies the material facts that the party contends are genuinely disputed so as to make a trial necessary.” N.D. Ind. L.R. 56-1(a), (b). The Seventh Circuit has also made it clear that:

[a] district court is not required to wade through improper denials and legal argument in search of a genuinely disputed fact. And a mere disagreement with the movant's asserted facts is inadequate if made without reference to specific supporting material. In short, judges are not like pigs, hunting for truffles buried in briefs.

Smith v. Lamz, 321 F.3d 680, 683 (7th Cir. 2003) (internal quotation marks, brackets, and citations omitted). Thus, when a non-movant fails to controvert a moving party's Statement of Material Facts with a properly supported Statement of Genuine Disputes, the movant's facts may be deemed admitted. Id. (“We have consistently held that a failure to respond by the nonmovant as mandated by the local rules results in an admission.”).

         Material Facts

         Because Montgomery and Dr. Falbo's response is devoid of a “Statement of Genuine Disputes” or citations to any relevant evidence that would dispute SFG's “Statement of Material Facts, ” the well-supported facts presented by SFG are considered undisputed and will be accepted as true.[1] Smith, 321 F.3d at 683. The material facts are as follows:[2]

         On August 27, 2012, 1st Source and Montgomery entered into a Loan and Security Agreement (the “Loan Agreement”) in which 1stSource agreed to lend Montgomery $1, 125, 000.00 pursuant to a contemporaneously signed and executed document entitled PROMISSORY NOTE - Term (the “Note”). (DE #1-1 & DE #1-2.) The Note is “secured by, and subject in all respects to, the terms and conditions contained in the [Loan] Agreement, all of which are incorporated by reference into [the] Note.” (DE #1-1, p. 1.) The Note references a “specific Collateral Schedule, ” attached to it as SCHEDULE “A” (“Schedule A”), which describes the collateral Montgomery pledged to 1st Source as a 1998 Learjet 31A with Serial No. 154 and FAA Registration No. N154RT (the “Aircraft”). (Id. at 1-3.) Both Section A of the Note and the Loan Agreement itself require Montgomery to keep the Aircraft in good repair and operating condition. (Id. at 3; DE #1-2, p. 2.) The Loan Agreement also requires Montgomery to not permit “any lien, encumbrance, claim, security interest, mechanic's lien, levy, attachment or other interest of any individual or entity” attach to the Aircraft. (DE #1-2, p. 2.) Montgomery agreed that it is responsible for paying “any fees, costs, expenses, penalties, or interest incurred by [1st Source]” in connection with the Loan Agreement, including, but not limited to, costs incurred for inspections, appraisals, or monitoring of the Aircraft and costs associated with exercising its rights and protecting its interest in the Aircraft. (Id.) Specifically, the Loan Agreement states that Montgomery must reimburse 1st Source any money it expends for “taking possession of, holding, preparing for sale or other disposition and selling or otherwise disposing of the [Aircraft]” and for related attorney fees and costs. (Id.)[3]

         Pursuant to the Loan Agreement, Montgomery is considered to be in default if, among other events, it fails to make payments as due or fails to perform any obligation under the Loan Agreement, Note, or Schedule A. (Id. at 2-3.) In the event of a default, 1st Source has the option of “declar[ing] all or any part of the remaining unpaid indebtedness . . . to be immediately due and payable . . . .” (Id. at 3.) In addition, the Loan Agreement allows 1st Source to exercise all rights and remedies provided in the Loan Agreement, the Uniform Commercial Code (“UCC”), or any other applicable law, which may include taking possession of the Aircraft or performing any of Montgomery's obligations that Montgomery failed to perform. (Id.) After a default has continued for thirty days, and for as long as the default continues, 1st Source is entitled to “charge interest at the rate set forth in the applicable Note plus three percent (3%) per annum (the “Default Rate”).” (Id.)[4]

         On August 27, 2012, Dr. Falbo executed a Guaranty of Payment (the “Guaranty”) in which he “unconditionally guarantee[d] . . . the full and prompt payment and performance when due of all Obligations due and to become due” to 1st Source by Montgomery pursuant to the Loan Agreement. (DE #1-3, p. 1.) The Guaranty defines those “Obligations” as “all existing and future indebtedness, liabilities and obligations of every kind, nature and description . . . whether direct or indirect, absolute or contingent, and whether now due and owing or hereafter due and owing . . . .” (Id.) Dr. Falbo agreed that the Guaranty ...

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