     Case: 10-50588 Document: 00511379522 Page: 1 Date Filed: 02/11/2011




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

                                                 FILED
                                                                          February 11, 2011
                                     No. 10-50588
                                   Summary Calendar                         Lyle W. Cayce
                                                                                 Clerk

AMK 2000-A, L.L.C.,

                                                   Plaintiff-Appellee

v.

AMINA MALIEK, an Individual; AMIRALI MAVANI, an Individual;
DOLLAR VALUE, INCORPORATED, a Texas Corporation;
M & V COMPANY, INCORPORATED, a Texas Corporation,

                                                   Defendants-Appellants


                    Appeal from the United States District Court
                         for the Western District of Texas
                              USDC No. 5:09-CV-825


Before JONES, Chief Judge, and JOLLY and SOUTHWICK, Circuit Judges.
PER CURIAM:*
       Amina Maliek, Amirali Mavani, Dollar Value, Inc., and M&V Company,
Inc. (“Appellants”), executed a guaranty in favor of U.S. Bank National
Association (“U.S. Bank”)1 as part of a commercial loan transaction. After the


       *
         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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .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.
       1
        U.S. Bank National Association was the trustee for the Registered Holders of FMAC
Loan Receivables Trust 2000-A, a special purpose business trust organized and existing under
Delaware law, the lender in this case. On October 8, 2010, U.S. Bank National Association
     Case: 10-50588 Document: 00511379522 Page: 2 Date Filed: 02/11/2011




                                        No. 10-50588
original borrower defaulted, Appellants became liable for all amounts due under
the loan agreement. The district court awarded U.S. Bank $2,215,870.07 in
damages,      which    included     a   contractual      prepayment       penalty     totaling
$754,656.59. Appellants only challenge the award of the prepayment penalty
on appeal, arguing it constitutes an unenforceable penalty. We affirm.
                                               I.
       Appellants executed a loan guaranty under which they personally
guaranteed the full payment of all obligations arising under a commercial loan
agreement between AMK Enterprises, LLC (“AMK”), the borrower, and U.S.
Bank. The original loan amount guaranteed by Appellants was $1,250,000, with
interest at 9.5% per annum. After AMK defaulted on the loan, U.S. Bank sought
payment from Appellants and eventually initiated this diversity action for
breach of contract when Appellants failed to make any payment to U.S. Bank.
       On March 18, 2010, the district court granted U.S. Bank’s motion for
partial summary judgment on liability, finding Appellants liable for breach of
the guaranty. On April 7, 2010, U.S. Bank then filed a motion for partial
summary judgment on damages.                 U.S. Bank sought $2,215,870.07, which
included all amounts provided for under the loan agreement. Of this sum,
Appellants disputed only the “Defeasance Amount,” which totaled $754,656.59
and which Appellants argued was an unenforceable penalty. They first raised
this affirmative defense, however, in their response to U.S. Bank’s motion for
summary judgment on damages. Apparently recognizing their failure to plead
it earlier, Appellants also filed a motion for leave to amend their answer to
include this defense.




transferred its interest in the judgment and the guaranty to AMK 2000-A LLC, making it the
real party in interest. For ease of reference, however, we will continue to refer to “U.S. Bank”
in this appeal.

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                                       No. 10-50588
       On May 12, 2010, the district court denied Appellants’ motion for leave to
amend and granted U.S. Bank’s damages motion, concluding that Appellants’
defense was not supported by the relevant authority and thus that amendment
would be futile. The district court then entered a judgment against Appellants
for $2,215,870.07, plus post-judgment interest.
       On appeal, Appellants argue that the Defeasance Amount is an
unenforceable penalty, and that the district court erred in denying their motion
for leave to amend. Because we conclude that the Defeasance Amount is not an
unenforceable penalty, we affirm the judgment of the district court.
                                             II.
       According to the promissory note, the borrower could not prepay the loan
unless the borrower also paid a “Defeasance Amount,” which would be
determined according to a pre-arranged formula.2 The promissory note provided
that the Defeasance Amount would be due not only in the case of voluntary
prepayment, but also in the event of acceleration due to default.3 Consequently,
Appellants became liable for that fee once AMK defaulted on the loan. U.S.
Bank claimed that the Defeasance Amount following AMK’s default totaled




       2
          Section 2.5.2 of the promissory note stated, “The Defeasance Amount shall be the
amount which, when added to the [outstanding] Principal Amount of the Note . . . is sufficient
to purchase direct, non-callable obligations of the United States of America (the “U.S.
Obligations”) that provide for payments prior . . . to the due date for each Regular Monthly
Payment Amount or principal payment through and including the Maturity Date, with each
such payment being equal to or greater than (1) the Regular Monthly Payment Amount and
(2) with respect to the payment due on the Maturity Date, the entire outstanding Principal
Amount of this Note together with any interest accrued as of such date and all other amounts
payable pursuant to the Loan Documents. The Defeasance Amount shall include an amount
sufficient to pay all costs, charges and expenses incurred or to be incurred in connection with
the purchase of the U.S. Obligations.”
       3
         Section 2.5.3 provides, “The Defeasance Amount shall apply not only in the case of
voluntary prepayment, but also in the event that this Note becomes due and payable in full
in the event of acceleration by reason of the occurrence of a Default Event or otherwise.”

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                                       No. 10-50588
$754,656.59, which the court awarded.4 Appellants argue on appeal that this
amount is “excessive and unreasonable and shocking,” and that the fee should
thus be construed as an “unenforceable penalty” under Texas law.5 Appellants
are mistaken.
       “Under Texas law, a borrower has no right to prepay a loan in the absence
of the contract permitting it.” Parker Plaza W. Partners v. UNUM Pension &
Ins. Co., 941 F.2d 349, 352 (5th Cir. 1991); Groseclose v. Rum, 860 S.W.2d 554,
557 (Tex. App. 1993) (same). Here, the promissory note provided AMK the right
to prepay the loan conditioned upon payment of what essentially amounts to a
prepayment penalty. See 13 T EX. J UR. 3 D Consumer & Borrower Protection § 56
(2010) (“A prepayment penalty is a payment or consideration for the option or
privilege of paying off a loan early.”). Such penalties are explicitly authorized
by Texas statute and are valid “whether payable in the event of voluntary
prepayment, involuntary prepayment, acceleration of maturity, or other cause
that involves premature termination of the loan.” See T EX. F IN. C ODE A NN .
§ 306.005 (West 2006); see also Parker Plaza, 941 F.2d at 356 (“Texas public
policy is not violated solely because a prepayment premium results from lender
acceleration.”).


       4
          The Appellants object to the affidavit upon which this figure is based. They claim
that the affidavit is “conclusionary [sic]” and provides “no explanation as to the reasoning or
methodology explaining how the purported [Defeasance Amount] was calculated.” While we
agree the affidavit provides no explanation as to how it arrived at the Defeasance Amount, the
Appellants never submitted proof–or even claim–that the total is incorrect. In fact, Section
2.5.4 of the Note provides that the Lender’s determination of the Defeasance Amount is
“binding and conclusive” on the parties “[a]bsent material and manifest error.” Consequently,
once U.S. Bank submitted the affidavit in question, the burden shifted to the Appellants to
provide competent summary judgment evidence establishing the existence of a genuine fact
issue. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct.
1348, 1356 (1986). Since they provided no such evidence, we accept U.S. Bank’s assertion that
the Defeasance Amount equals $754,656.59.
       5
         The parties agree Texas substantive law governs this diversity suit. See Erie R.R.
Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817 (1938).

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                                       No. 10-50588
       Importantly, Texas law does not state that agreed-upon prepayment
penalties are subject to a “reasonableness” test. See, e.g., T EX. F IN. C ODE A NN.
§ 306.005 (“A creditor and an obligor may agree to a prepayment premium,
make-whole premium, or similar fee or charge.”); Bearden v. Tarrant Sav. Ass’n,
643 S.W.2d 247, 249 (Tex. App. 1982) (finding, under Texas law, no requirement
for prepayment penalty to be reasonable). Nor do we find evidence that Texas
courts apply the rules governing liquidated damages clauses to invalidate
prepayment penalties under commercial loan agreements.                       Consequently,
Appellants’ challenge to the prepayment penalty is meritless.6
       The district court thus properly denied Appellants’ motion to amend
because amendment would have been futile. See Avatar Exploration, Inc. v.
Chevron, U.S.A., Inc., 933 F.2d 314, 321 (5th Cir. 1991). The court also correctly
calculated damages to include the Defeasance Amount.
                                                                               AFFIRMED.




       6
          Appellants briefly mention in their brief that the Defeasance Amount “far exceed[s]
a legal interest rate.” While this suggests that Appellants challenge the Defeasance Amount
also on grounds of usury, the brief does not mention usury in either its statement of issues or
its summary of argument, nor does the brief cite authority on the subject. In fact, the
summary of argument adverts only to the argument that the Defeasance Amount
“constitute[s] an unenforceable penalty.” Consequently, any usury arguments have been
waived on appeal, and thus do not consider them. Sanders v. Unum Life Ins. Co. of Am., 553
F.3d 922, 926 (5th Cir. 2008) (“A party waives an issue if he fails to adequately brief it on
appeal.”) (internal quotation marks and citation omitted).

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