Mail America Communications, Inc. v. World Healing Center Church, Inc.

Background

Mail America Communications, Inc. performed printing and distribution services for World Healing Center Church, Inc. Beginning in 2006, the Church fell behind on its payment obligations. On April 26, 2012, the Church signed and delivered a promissory note with a principal amount of $5,621,851.62 to consolidate the outstanding balances.

After the Church defaulted, the parties entered into a 2014 forbearance agreement, under which the Church acknowledged the note’s validity and its default. The Church later stopped making payments under that agreement. On July 19, 2018, the parties entered into another forbearance agreement. The Church and a related affidavit acknowledged that the amount outstanding under the note was $3,098,380.06 as of June 30, 2018. After another default, Mail America accelerated the amount due, demanded payment, and filed this action.

Motions and Arguments

Mail America moved for summary judgment under Federal Rule of Civil Procedure 56 and for an evidentiary preclusion order under Rule 37. Summary judgment is a decision without a trial when the record shows no genuine dispute over a material fact and the moving party is entitled to judgment as a matter of law.

Mail America argued that it had established the note, the Church’s default, and the amount owed. The Church did not dispute signing or delivering the note or failing to make the required minimum payments. Instead, it argued that Mail America had improperly credited payments and that the Church had paid the note in full and was entitled to a refund of approximately $49,364. The Church relied on two spreadsheets.

Evidentiary Preclusion

The Court granted Mail America’s request to preclude evidence under Rule 37(c). The Church had not pleaded a payment-in-full defense in its answer, had not previously taken that position or produced supporting evidence during the litigation, and had admitted that it made no payments toward the note or the 2014 forbearance agreement during a period when it later claimed to have paid more than $250,000.

The Court also found that the Church failed to produce responsive payment information after Mail America served discovery requests. The two conclusory spreadsheets were submitted only during confidential settlement discussions and were not produced by the discovery deadline. The Court concluded that allowing the new evidence would deprive Mail America of the opportunity to investigate it through discovery and depositions. It therefore precluded the Church from introducing evidence or documents that it could have produced in response to Mail America’s first discovery requests.

Amount Owed and Ruling

The Court held that Mail America established a prima facie case for recovery on the promissory note by showing the valid note and the Church’s failure to pay after demand. The Church’s conclusory assertions and spreadsheets did not create a genuine factual dispute, particularly because the Church had acknowledged the $3,098,380.06 balance in the 2018 forbearance agreement and affidavit.

The Court calculated the amount due as of August 31, 2018, by adding $17,841.68 in interest and subtracting $123,000 in additional forbearance payments, resulting in $2,993,221.74. It held that interest continued to accrue on the unpaid principal at 4% per year, or $328.02 per day, under the 2018 forbearance agreement.

Judge Alvin K. Hellerstein granted Mail America’s motion for summary judgment and evidentiary preclusion order. The Clerk was directed to enter judgment for Mail America against the Church for $2,993,221.74, plus post-August 31, 2018 interest at 4% per year on the unpaid principal, costs of suit, and reasonable attorney’s fees, excluding accelerated or unmatured late fees or penalties. The Court also directed the Clerk to close the case.