(2008)
PHILIP MORRIS USA INC., Plaintiff,
v.
William W. LEE, et al., Defendants.
No. EP-05-CA-0490-PRM.
United States District Court, W.D. Texas, El Paso Division.
April 8, 2008.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST DEFENDANTS WILLIAM W. LEE AND FELIPE CASTANEDA
PHILIP R. MARTINEZ, District Judge.
On this day, the Court considered (1) Plaintiff Philip Morris USA Inc.'s ("Philip Morris") "Motion for Summary Judgment Against Defendants William W. Lee and Felipe Castaneda," filed on September 17, 2007; (2) Defendant William W. Lee's ("Lee") "Response to Plaintiffs Motion for Summary Judgment," filed on October 16, 2007; (3) Philip Morris's "Reply Memorandum in Support of Its Motion for Summary Judgment Against Defendants William Lee and Felipe Castaneda," filed on November 2, 2007; (4) Defendant Felipe Castaneda's ("Castaneda") pro se "Response of Felipe Castaneda to Plaintiffs Motion for Summary Judgment," filed on November 5, 2007;[1] (5) Philip Morris's "Objections to Affidavit of Defendant William W. Lee and Motion to Strike," filed on November 1, 2007; (6) Lee's "Response of William W. Lee to Plaintiff, Phillip [sic] Morris USA, [sic] Inc.'s Objections to Affidavit and Motion to Strike," filed on November 6, 2007; (7) Philip Morris's "Reply in Support of its Motion for Summary Judgment Against Defendant Felipe Castaneda," filed on November 20, 2007; and (8) Philip Morris's "Reply to William W. Lee's Response to Objection [sic] to Affidavit and Motion to Strike," filed on November 20, 2007, in the above-captioned cause. After due consideration, the Court is of the opinion that Philip Morris's Motion for Summary Judgment should be granted in part and denied in part for the reasons set forth below.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background
Philip Morris is a Virginia corporation with its principal place of business in Virginia. PI.'s Second Am. Compl. ¶ 14. As evidenced by certificates of registration issued by the United States Patent and Trademark Office (the "PTO"), Philip Morris is the registered owner of the Marlboro word mark and the Marlboro Roof Design label mark (collectively, the "Marlboro Marks"), which it uses in connection with its tobacco products. Pl's Mot. Summ. J. App. Exs. 1, 2 (Certificates of Registration). The present suit arises from a seizure of counterfeit Marlboro cigarettes made by the United States Bureau of Customs and Border Protection ("Customs"). Id. App. Ex. 4 (Notice of Seizure). Neither party disputes the facts as stated below.
In 2003, Lee and Castaneda, both residents of El Paso, Texas, became acquainted. Id. App. Ex. B, 32, 41 (Lee's Deposition). They agreed to form a business importing and selling cigarettes in the United States. Id. App. Ex. B, 32, 41. They named the business Kagro Inc. ("Kagro"). Id. App. Ex. 6 (Kagro Partnership Agreement).[2] Though Lee lacked prior experience in the cigarette industry, he became president of Kagro. Lee's Resp. to Pl's Mot. Summ. J. Lee Aff. ¶ 17; PI. Mot. Summ. J. App. Ex. 6. Castaneda, on the other hand, had some familiarity with the industry. In 2004, he pled guilty in the United States District Court for the Western District of Texas to conspiring to smuggle counterfeit cigarettes into the United States and to trafficking in counterfeit goods in 2001 and 2002, in violation of 18 U.S.C. §§ 371, 545, 2342 and 2320. Pl.'s Mot. Summ. J. App. Ex. E, 158-59 (Castaneda's deposition).[3]
In discussing their partnership, Castaneda told Lee he had found a buyer looking to purchase cigarettes. Id. App. Ex. B, 32. Castaneda identified the buyer as Raul Martinez, III ("Martinez"), who lived in El Paso, Texas. Id. App. Ex. B, 43. Castaneda asked Lee to locate a cigarette distributor from whom Kagro could buy cigarettes and then re-sell them to Martinez. Id. App. Ex. B, 32-33, 38. Lee found a sales advertisement on the Internet for Marlboro cigarettes posted by Synergy Trading Group, Inc. ("Synergy"), a Florida-based company. Id. App. Ex. B, 42. Lee contacted Synergy and spoke with two of its representatives, Julian Balea ("Balea") and Ronald Morrison ("Morrison"). Id. App. Ex. B, 43-45.
According to the sales invoice, Kagro agreed to purchase 1,960 master cases of cigarettes from Synergy at $260.00 each. Id. App. Ex. 8 (Sales Invoice). The cigarettes were to be delivered in two equal installments.[4]Id. App. Exs. 8; B, 170-71. Kagro was to pay Synergy $254,800.00 to cover the cost of the first installment. Id. App. Ex. B, 110. Kagro arranged to sell the cigarettes to Martinez at $345.00 per master case. Id. App. Ex. 7 (Kagro Purchase Order). Kagro planned to repeat this scheme each month over the course of a year. Lee and Castaneda stood to profit approximately $1 million from the entire transaction. Id. App. Ex. B, 171, 173-74.
Synergy stored the cigarettes in a warehouse in Curacao, Netherlands Antilles. Id. App. Ex. 8. It hired John Tominelli ("Tominelli") and his company, Southeastern Cargo Services, Inc., to inspect the cigarettes. Id. App. Ex. C, 101-02 (Balea's deposition). After completing the inspection, Tominelli issued a report, which listed the quantity, packaging, and freshness of the cigarettes. Id. App. Ex. 9 (Inspection Report). The report falsely described the cigarettes as "Made Under Authority of Philip Morris Products S.A., Neuchatel, Switzerland." Id. App. Ex. 9. According to Balea and Morrison, before the goods were shipped to El Paso, Texas, Tominelli told Castaneda that it was illegal to import the cigarettes into the United States. Id. App. Exs. C, 153-54; F, 41-47 (Morrison's deposition). Castaneda responded that he "wasn't really concerned about that [illegality]." Id. App. Ex. C, 153-54. He also told Morrison that he had "everything arranged," and advised him not to "worry" because his "contacts in Houston [were] strong ...," which Morrison understood to indicate that Castaneda knew that importing the cigarettes was illegal, but had arranged with Customs agents to ensure that they would nonetheless be imported. Id. App. Ex. F, 47.
Customs notified Philip Morris that it seized a shipment of counterfeit Marlboro cigarettes at the Port of Houston, Texas on October 8, 2003. Id. App. Ex. 4. The cigarettes bore marks indicating that they had been shipped from Curasao and were destined for El Paso, Texas. Id. App. Ex. 4.

B. Procedural Background
As a result of the seizure by Customs, Philip Morris initiated this action against numerous defendants, including Lee and Castaneda.[5] Philip Morris raised the following six claims: (1) trademark infringement in violation of 15 U.S.C. § 1114(1); (2) false designation of origin in violation of 15 U.S.C. § 1125(a)(1)(A); (3) unlawful importation of goods bearing infringing marks in violation of 15 U.S.C. § 1124; (4) unlawful importation of goods bearing registered trademarks in violation of 19 U.S.C. § 1526(a); (5) trademark infringement in violation of Texas Business and Commerce Code § 16.26; and (6) unfair competition in violation of Texas common law. Pl's Second Am. Compl. ¶ 56-82.
Philip Morris moves for summary judgment against Lee and Castaneda on all six grounds. Pl's Mot. Summ. J. ¶ 1. In his response, Lee "concedes liability and agrees to a permanent injunction." Lee's Resp. to Pl's Mot. Summ. J. ¶ 2. He opposes the imposition of statutory damages and the award of attorneys' fees. Id. at ¶ 3, 13. In his response, Castaneda admits importing cigarettes into the United States, but submits that he believed the cigarettes were genuine. Castaneda's Resp. to Pl's Mot. Summ. J. ¶¶ 6, 8. Castaneda also alleges that he thought that he could lawfully import the cigarettes because he intended to re-sell them in duty free stores. Id.

II. LEGAL STANDARD

A. Summary Judgment
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). A genuine issue exists only if there are "factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
To defeat summary judgment, the nonmoving party must set forth specific facts showing the existence of a genuine issue concerning an essential component of the case. Moms v. Covan World Wide Moving, Lie, 144 F.3d 377, 380 (5th Cir.1998). Conclusionary allegations and unsubstantiated allegations are insufficient to defeat a motion for summary judgment. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 347 (5th Cir.2007); Douglass v. United Servs. Auto Ass'n, 79 F.3d 1415, 1429 (5th Cir.1996). In evaluating a motion for summary judgment, the court reviews the evidence in the light most favorable to the non-moving party and draws any reasonable inferences in its favor. Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th Cir.2001).

B. Philip Morris's Objections to Lee's Summary Judgment Evidence
In support of his Response, Lee submits his affidavit. Lee's Resp. to Pl's Mot. Summ. J. Lee Aff. Philip Morris objects to portions of this affidavit as inadmissible on various grounds. Pl's Obj. 1-4.
In responding to a motion for summary judgment, the non-movant must "set forth facts that would be admissible in evidence at trial." Geiserman v. Mac-Donald, 893 F.2d 787, 792 (5th Cir.1990) (discussing Federal Rule of Civil Procedure 56(e)); see also Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 192 (5th Cir. 1991) (striking a letter submitted as summary judgment evidence because it would be inadmissible if offered at trial). "Material that is inadmissible will not be considered on a motion for summary judgment because it would not establish a genuine issue of material fact if offered at trial...." Id. An affidavit may be submitted as summary judgment evidence if it is based on the affiant's personal knowledge, sets forth admissible facts, and shows that the affiant is competent to testify to the matter stated therein. FED. R. CIV. P. 56(e).
The Court will note Philip Morris's objections and make admissibility determinations as it considers the summary judgment motion. Objections to portions of Lee's affidavit that the Court does not consider will be overruled as moot.

III. LEGAL ANALYSIS

A. Defendants are Liable for Violating the Lanham Act
Philip Morris argues that it is entitled to summary judgment against Lee and Castaneda for violating the Lanham Act, 18 U.S.C. § 1114(1), which prohibits trademark infringement, and § 1125(a), which prohibits false designation of origin.[6]See 15 U.S.C. §§ 1114(1), 1125(a). The analysis of both claims is often identical, and the same evidence will establish liability. Brookfield Commc'n Inc. v. W. Coast. Entm't Corp., 174 F.3d 1036, 1046-47 n. 8 (9th Cir.1999); Philip Morris USA Inc. v. Liu, 489 F.Supp.2d 1119, 1121-22 (C.D.Cal.2007).
Philip Morris will prevail on its Lanham Act claims if it establishes that (1) Philip Morris possess valid trademarks entitled to protection under the Lanham Act, and (2) Lee and Castaneda used similar marks in commerce in a manner likely to confuse or deceive consumers who have come to recognize the Marlboro Marks. See Microsoft Corp. v. Wholesale Club, Inc., 129 F.Supp.2d 995, 1007 (S.D.Tex. 2000); accord 15 U.S.C. §§ 1114(1), 1125(a). Lee does not contest that Philip Morris has established these elements, and concedes liability. Lee's Resp. to Pl's Mot. Summ. J. ¶ 2. Castaneda, however, does not concede liability under the Lanham Act. Accordingly, the Court will analyze whether Philip Morris is entitled to summary judgment against Castaneda.

1. Philip Morris Owns Valid and Protectable Trademark Rights in the Marlboro Marks
The "threshold requirement that the plaintiff possesses a protectable mark" is satisfied by registering the trademark with the PTO. Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 194 (5th Cir.1998). A mark registered with the PTO is presumptively valid. Enrique Bernat F., S.A. v. Guadalajara, Inc., 210 F.3d 439, 443 n. 2 (5th Cir.2000) (citing 15 U.S.C. § 1057(b)). Once a registered mark is used continuously for five years from the date of registration, it becomes "incontestable." Pebble Beach Co. v. Tour 18 I, 155 F.3d 526, 533 n. 4 (5th Cir.1998) (citing 15 U.S.C. § 1065). An incontestable mark entitles the registrant to exclusive use of the mark in commerce, subject to the defenses enumerated in 15 U.S.C. § 1115(b).[7]Id.
In this case, Philip Morris has registered with the PTO as the owner of the Marlboro word mark[8] and the Marlboro Roof Design[9] label mark. Pl's Mot. Summ. J. Exs. 1, 2. It is undisputed that Philip Morris has used these marks in connection with its tobacco products continuously for several decades. Accordingly, Philip Morris owns valid and protectable trademark rights in the Marlboro Marks, and possesses incontestable rights to their exclusive use.

2. Castaneda Used the Marlboro Marks in Commerce in a Manner Likely to Cause Confusion

a. Castaneda Admits Using the Marlboro Marks in Commerce
To establish liability under the Lanham Act, a plaintiff must show that the alleged infringer used a trademark in commerce. 15 U.S.C. §§ 1114(1), 1125(a). "The term use in commerce means the bona fide use of a mark in the ordinary course of trade [such as] in connection with the sale, offering for sale, or advertising [of goods]." 15 U.S.C. § 1127. A mark is used in commerce "when (A) it is placed on the goods ... and (B) the goods are sold or transported in commerce." Id. at § 1127(1). Offering for sale and importing counterfeit goods into the United States constitutes "use in commerce." Philip Morris USA, Inc. v. Lee, 481 F.Supp.2d 742, 748 (W.D.Tex.2006) ("[L]iability [under the Lanham Act] attaches to individuals responsible for the importation of counterfeit goods, even when the goods are seized at a port of entry and are not distributed further."); Liu, 489 F.Supp.2d at 1122 n. 2 ("[W]here [Customs] seizes counterfeit products at the port of entry, before they are further transported or distributed, liability still attaches under ... the Lanham Act.")
In his deposition, Castaneda admits to (1) contracting to sell cigarettes bearing the Marlboro Mark, and (2) importing these goods into the United States. Pl's Mot. Summ. J. App. Ex. E, 27. In addition, the Inspection Report identifies El Paso, Texas, as the destination of the cigarettes shipped from Curacao, and the Seizure Notice lists "Kagro, Inc.," in El Paso, Texas, as the recipient of the goods. Id. App. Exs. 4, 9. Accordingly, the Court holds that Castaneda used the Marlboro Marks in commerce when he (1) contracted to sell counterfeit cigarettes, and (2) imported them into the United States.

b. Counterfeit Marlboro Cigarettes Cause Confusion
"The touchstone of [liability under the Lanham Act] is whether the defendant's actions are `likely to cause confusion.'" Matrix Essentials, Inc. v. Emporium Drug Mart, Inc., 988 F.2d 587, 592 (5th Cir.1993) (quoting 15 U.S.C. § 1125(a)). In cases involving counterfeit. goods, courts have consistently found a likelihood of confusion. See, e.g., Microsoft Corp., 129 F.Supp.2d. at 1007 n. 11 (finding a likelihood of confusion existed where the defendants "sold counterfeit products on which plaintiffs registered marks appear in their entirety"); Phillip Morris USA Inc. v. Shalabi 352 F.Supp.2d 1067, 1073 (C.D.Cal.2004) ("[C]ounterfeit marks are inherently confusing."); Gucci Am. Inc. v. Duty Free Apparel, Ltd., 286 F.Supp.2d 284, 287 (S.D.N.Y.2003) ("[C]ounterfeits, by their very nature, cause confusion."). In these situations, a court "need only determine... whether the items are, in fact, counterfeit...." Gucci Am. Inc., 286 F.Supp.2d at 287. Counterfeit goods are products that are "`identical with or substantially indistinguishable from'" trademarked goods. Rolex Watch USA Inc. v. Meece, 158 F.3d 816, 826 (5th Cir.1998) (quoting 15 U.S.C. § 1127).
None of the parties dispute that the cigarettes at issue were substantially indistinguishable from authentic Marlboro cigarettes. While they were not manufactured by Philip Morris, they bore copies of the Marlboro Marks. Id. App. Ex. 4. They were also advertised as genuine Marlboro cigarettes. Id. App. Ex. B, 35, 44. Both the Inspection Report and the Sales Invoice described them as genuine Marlboro cigarettes. Id. App. Exs. 8, 9. Thus, the Court finds that the seized cigarettes are counterfeit Marlboro cigarettes which are inherently likely to confuse or deceive consumers who have come to recognize the Marlboro Marks. Accordingly, Philip Morris is entitled to summary judgment against Castaneda for violating the Lanham Act.[10]

B. Castaneda is Liable for Violating the Tariff Act
Philip Morris also alleges that Castaneda violated § 526(a) of the Tariff Act, 19 U.S.C. § 1526(a), by illegally importing merchandise bearing trademarks into the United States. To establish liability, Philip Morris must show that: (1) it has registered its Marlboro Marks with the PTO; (2) it has filed copies of the registration certificates with the Department of Treasury; and (3) Castaneda imported goods bearing the Marlboro Marks. See 19 U.S.C. § 1526(a).
The Court has already found that Philip Morris registered the Marlboro Marks with the PTO and that Castaneda unlawfully imported counterfeit Marlboro cigarettes into the United States. See, supra, III.A(1) & (2)(a). A letter from the Department of Treasury establishes that Philip Morris properly filed copies of the marks' registration. Pl's Mot. Summ. J. App. Ex. 3 (Letter from the Department of Treasury). Thus, Philip Morris is entitled to summary judgment on the basis of § 526(a) of the Tariff Act.

IV. REMEDIES
A "final judgment shall grant the relief to which each party is entitled...." FED. R. Civ. P. 54(c). Under the Lanham Act, the court may award an aggrieved party injunctive relief, statutory damages, costs of court, and, in exceptional cases, reasonable attorneys' fees. 15 U.S.C. §§ 1116, 1117(a).

A. Permanent Injunction
A court may issue an injunction to protect against future counterfeiting "according to principles of equity and upon such terms as the court may deem reasonable to prevent the violation of any right of the registrant of a mark." 15 U.S.C. § 1116(a). To merit injunctive relief, a plaintiff must "show that the likelihood of confusion will actually cause him irreparable injury for which there is no adequate legal remedy." Union Nat'l Bank v. Union Nat'l Bank, 909 F.2d 839, 844 (5th Cir.1990).
Lee expressly concedes liability and agrees to a permanent injunction. Lee's Resp. to Pl.'s Mot. Summ. J. ¶ 2. An injunction is also proper against Castaneda. Philip Morris has established a likelihood of confusion, which can constitute irreparable harm. See, e.g., Hawkins Pro-Cuts v. DJT Hair, No. CA 3-96-CV-1728-R, 1997 WL 446458, at *7 (N.D.Tex. July 25, 1997) ("The likelihood of confusion... can constitute irreparable harm in a trademark case."); Chemlawn Servs. Corp. v. GNC Pumps, Inc., 690 F.Supp. 1560, 1569 (S.D.Tex.1988) ("likelihood of confusion... by its very nature causes irreparable harm."). Trademark infringement causes irreparable injury because the trademark owner suffers a loss of goodwill and damage to its reputation. Acme Refrigeration Supplies v. Acme Refrigeration, 961 F.Supp. 936, 938-39 (E.D.La. 1996) (holding that a trademark user suffers a loss of goodwill and damage to its reputation when it cannot control another's use of its marks). These injuries cannot be adequately compensated by legal damages. Am. Rice, Inc. v. Producers Rice Mill, Inc., No. H-05-3227, 2006 WL 1984592, at *8 (S.D.Tex. July 14, 2006). Due to the risk of irreparable harm to the goodwill of the Marlboro Marks and the damage to Philip Morris's reputation, the Court finds that a permanent injunction barring Lee and Castaneda from future counterfeiting activities is reasonably necessary to prevent any further violation of Philip Morris's trademark rights.[11]

B. Statutory Damages
Philip Morris has invoked its right under the Lanham Act, 15 U.S.C. § 1117(c), to elect statutory damages in lieu of actual damages. Pl's Second Amend. Compl. 20. A court has the discretion to award statutory damages between $500.00 and $100,000.00 per infringed mark. Rolex Watch USA, Inc., 158 F.3d at 824. Where the defendant is shown to have willfully infringed a trademark, the statutory maximum increases to $1 million per mark infringed. 15 U.S.C. § 1117(c)(2); see, e.g., Phillip Morris USA Inc. v. Marlboro Express, No. CV-03-1161, 2005 WL 2076921, at *6 (E.D.N.Y. Aug. 26, 2005) (awarding $4 million in damages based on the defendants' use of four trademarks); Philip Morris USA Inc. v. Banh et al, No. CV 03-4043, 2005 WL 5758392, at *7 (C.D.Cal. Jan. 14, 2005) (awarding $4 million in damages where the defendants used four trademarks to sell counterfeit cigarettes); Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 501-02 (C.D.Cal.2003) (awarding $2 million where the defendants infringed two trademarks).

1. Legal Standard for Willful Conduct
A defendant acts willfully "`if he knows his actions constitute an infringement.'" Taylor Made Golf Co. v. MJT Consulting Group, 265 F.Supp.2d 732, 748 (N.D.Tex.2003) (quoting Broad. Music, Inc. v. Xanthas, Inc., 855 F.2d 233, 236 (5th Cir.1988)). Furthermore, several Circuit Courts of Appeal, as well as courts within the Fifth Circuit, have found willful conduct where a defendant acted with "`reckless disregard for, or [with] willful blindness'" toward a trademark owner's rights. Berg v. Symons, 393 F.Supp.2d 525, 539-40 (S.D.Tex.2005) (quoting Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 263 (2nd Cir. 2005)).[12]See also Microsoft Corp., 129 F.Supp.2d at 1007 ("A finding of willfulness does not require actual knowledge, but rather willful blindness."); A Touch of Class Jewelry Co. v. J.C. Penney Co., No. CIV. A. 98-2949, 2000 WL 1224804, at *5 (E.D.La.2000) (quoting SecuraComm Consulting Inc. v. Securacom, 166 F.3d 182, 187 (3rd Cir.1999)) ("Knowing or willful infringement ... involves an intent to infringe or a deliberate disregard of the mark holder's rights.").
Willful blindness is a subjective inquiry which focuses on what the defendant suspected, and what he did with that suspicion. Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1151 n. 5 (7th Cir.1992). Indeed, the Fifth Circuit has held, in a non-trademark context, that a reasonable inference of willful blindness arises where the defendant is "subjectively aware of a high probability of the existence of the illegal conduct" and "purposely contrive[s] to avoid learning of the illegal conduct." United States v. Scott, 159 F.3d 916, 922 (5th Cir.1998) (finding a jury instruction on willful blindness proper in a fraud prosecution). Therefore, evidence that a defendant blinded himself to the illegal nature of his conduct may establish "willful infringement" within the meaning of the Lanham Act. Accordingly, the Court shall examine whether either Lee, Castaneda, or both, willfully infringed the Marlboro Marks.

2. Philip Morris's Allegations of Willful Conduct
Philip Morris submits the following as evidence that Lee and Castaneda acted willfully:
(1) Lee and Castaneda "purchased huge volumes of cigarettes at impossibly low prices." Pl.'s Mot. Summ. J. ¶ 52;
(2) At his deposition, Lee testified that Kagro stood to profit nearly $1 million by selling the counterfeit cigarettes to Martinez, and described this sum as "too much" money. According to Philip Morris, Lee "concedes that the enormous profits he stood to make on the deal "blinded him" to all other considerations...." Id.;

(3) Lee's request for a sample pack of the counterfeit cigarettes and subsequent comparison to a genuine pack of Marlboro cigarettes "only makes sense if [the comparison] were intended to establish that the counterfeit cigarettes looked sufficiently similar to the genuine cigarettes so as to deceive the consuming public." Id. at ¶ 53 (emphasis in original);
(4) Lee fraudulently obtained the funds necessary to purchase the counterfeit cigarettes from Synergy. Id. at ¶ 24;[13]
(5) Castaneda's past criminal history in illegally trafficking cigarettes "demonstrates that he must have known that the transaction at issue in this case was too good to be true." Id. at ¶ 54;[14]
(6) Castaneda's repeated references to his "special connections" in Customs attest to "[his] knowledge that the cigarettes were counterfeit and subject to seizure." Id.;

(7) Lee and Castaneda "offer [] no explanation for why Martinez, who is an experienced cigarette dealer, would agree to pay such a premium for a deal [that] he could have found himself on the Internet had the cigarettes been genuine." Pl.'s Reply ¶ 7;[15] and
(8) Lee never pursued judicial action against any of the parties involved in the transaction until the instant lawsuit was brought. Pl.'s Reply ¶ 2 1. Even then, Lee filed cross-claims and dismissed them. Id. According to Philip Morris, Lee failed to pursue his cross-claims in an effort "to appear to be an innocent victim when such was not the case." Id.

3. A Genuine Issue of Material Fact Exists as to Whether Lee Acted Willfully
Lee relies on his deposition, affidavit, and other documents as evidence that he believed the goods were genuine Marlboro cigarettes. Lee attaches three letters to his Response. Lee's Resp. to Pl.'s Mot. Summ. J. Exs. 3-5. In the first letter, sent from Lee to Balea, Lee asks Balea to provide a manufacturer's certificate of authenticity for the goods. Id. Ex. 3. In the second letter, also sent by Lee to Balea, Lee asks Balea to return the money Kagro paid to Synergy because the goods were never delivered. Id. Ex. 4. In the third letter, sent by Lee to Tominelli, Lee demands damages related to the seizure by Customs. Id. Ex. 5. Lee's deposition testimony also evidences his belief as to the authenticity of the goods. He testified that Synergy advertised the goods as genuine Marlboro cigarettes and that Balea claimed to supply authentic Marlboro cigarettes. Id. App. Ex. B, 44, 50, 58. He also testified that the counterfeit packs of cigarettes looked "real" and "almost identical" to genuine packs of Marlboro cigarettes. Id. App. Ex. B. 62, 63, 149. Finally, in his affidavit, Lee attests that he was never "told that the cigarettes could not come into the United States." Lee's Resp. to Pl.'s Mot. Summ. J. Lee Aff. ¶ 11.[16]
Lee also submits copies of business cards from two FBI agents as evidence that he contacted the FBI shortly after the seizure to "complain about Morrison, Balea and Tominielli."[17]Id. Ex. 6; Lee Aff. ¶ 15.[18] He contends that this shows he was "duped" into believing that the cigarettes were authentic. Id. at ¶ 12.
Lee also disputes Philip Morris's characterizations of willful conduct. As to the price of the cigarettes, Lee explains that he never questioned the price because he was not familiar enough with the cigarette industry to be aware of the market price of cigarettes.[19] Lee's Resp. to Pl.'s Mot. Summ. J. Lee Aff. ¶ 7.
Lee also challenges Philip Morris's assertion that Castaneda's criminal background is evidence that Lee acted willfully. In his affidavit, Lee asserts that he was "unaware of Castaneda's "past misfortune" or that Castaneda "previously dealt with... cigarettes." Id. at Lee Aff. ¶ 4.[20] This assertion is supported by Lee's deposition, in which he testified that he had been acquainted with Castaneda for only a short time. Pl.'s Mot. Summ. J. App. Ex. B, 38. While Castaneda may have "kn[own] a counterfeit transaction when he saw one," Pl.'s Reply ¶ 6, his state of mind cannot be evidence that Lee acted willfully.
As to Lee's deposition testimony that he was "blinded" by the opportunity to make nearly $1 million in profit, which Philip Morris construes as an admission of willful conduct, Pl.'s Mot. Summ. J. ¶ 52, Lee explains that he made the statement in hindsight. Lee's Resp. to Pl.'s Mot. Summ. J. Lee Aff. ¶ 7. He contends that "looking back, ... [he] was very negligent in not finding out more about the importation of cigarettes." Id. at Lee Aff. ¶ 7.[21]
As to his request for a sample pack of cigarettes, Lee that he sought to verify their authenticity in light of media reports of cigarette smuggling.[22] Pl.'s Mot. Summ. J. App. Ex. B, 59; Lee's Resp. to Pl.'s Mot. Summ. J. Lee Aff. 118.
After reviewing this evidence, the Court finds a genuine issue of material fact exists regarding whether Lee acted willfully. Based on the evidence, a reasonable jury could find Lee believed the cigarettes were authentic. The Court recognizes that Philip Morris has presented evidence that Lee purchased cigarettes well below market price, which may raise an inference of willful blindness. See Microsoft Corp., 129 F.Supp.2d at 1008 (holding that "a suspiciously low price allows an inference of constructive knowledge that merchandise was counterfeit"). However, there is also evidence from which a reasonable jury could find that Lee's lack of experience in cigarette industry accounts for his failure to question the legitimacy of the price. Drawing a reasonable inference in Lee's favor, the Court finds that Lee's retrospective admission that he acted negligently does not establish willful conduct. In addition, a reasonable jury could find that Lee requested and subsequently compared the cigarettes in an effort to conform with the law. Therefore, a fact issue remains concerning the willfulness of Lee's conduct, and summary judgment is inappropriate to the extent that Philip Morris asks for a finding that Lee willfully infringed its mark.
Furthermore, the Court is not in a position at this time to determine whether, and in what amount, statutory damages for non-willful infringement are appropriate' against Lee. Philip Morris urges the Court to invoke its discretion and award the $100,000.00 statutory maximum, which amount Lee argues is "unrealistic, draconian and punitive." Lee's Resp. to Pl.'s Mot. Summ. J. ¶ 3.[23] Philip Morris fails to identify what factors courts have considered in awarding the maximum amount of damages, as opposed to the minimum, or some other value. Accordingly, the Court denies Philip Morris's request for an award of statutory damages as against Lee.

4. Castaneda Acted Willfully
As to Castaneda, the Court finds Philip Morris has presented undisputed evidence that he willfully purchased and imported counterfeit cigarettes. Both Balea and Morrison testified at their depositions that Castaneda knew the cigarettes could not be lawfully imported into the United States. Id. App. Exs. C, 153-154; F, 41-47. Castaneda also told Balea that he "wasn't really concerned about" the illegality of the importation, and stated to Morrison that his "contacts in Houston are so strong [that they shouldn't] worry about [the illegality]." Id. App. Exs. C, 153-54; F, 47.
There is also undisputed evidence that Castaneda purposely avoided learning of the illegality of his conduct. Specifically, there is no evidence that he sought to verify or confirm the authenticity of the goods despite being alerted as to a potential illegality regarding their importation.
While Castaneda, like Lee, alleges that he "was always under the impression that [the] product was authentic ...," Castaneda's Resp. to Pl.'s Mot. Summ. J. ¶ 8, he fails to substantiate his allegations with an affidavit or any other evidence. His general denial is insufficient to rebut the evidence submitted by Philip Morris. Turner, 476 F.3d at 347.
This case is similar to Liu, where the court found that the defendant willfully violated the Lanham Act when he transported counterfeit Marlboro cigarettes. Liu, 489 F.Supp.2d at 1124. The court relied on evidence that the defendant failed to question unusual conduct related to transporting the cigarettes. Id. Moreover, the court found it "most telling [] [that the] [d]efendant completely disregarded a third-party's statement that there was a problem with the shipment, that he would no longer assist with the transloading, and that he suggested [the] [d]efendant do the same." Id.
In the present case, in addition to evidence that Castaneda ignored warnings as to the illegal nature of his conduct and failed to confirm whether the cigarettes were authentic, he also decided to partner with Lee despite Lee's lack of familiarity with the cigarette industry. Therefore, the Court finds Philip Morris has established that Castaneda willfully violated the Lanham Act. Because Philip Morris has not identified what factors are relevant in considering whether to award the maximum amount of statutory damages, the Court denies its request for such an award at this time.

C. Attorney's Fees
The Lanham Act also allows for an award of attorney's fees "`in exceptional cases.'" Seatrax, Inc. v. Sonbeck Int'l Inc., 200 F.3d 358, 372-73 (5th Cir. 2000) (quoting 15 U.S.C. § 1117). The exceptional case is one in which the defendant's conduct is "`malicious, fraudulent, or willful,'" and shows "`a high degree of culpability.'" Martin's Herend Imports v. Diamond & Gem Trading USA, 112 F.3d 1296, 1305 (5th Cir.1997) (quoting Texas Pig Stands, Inc. v. Hard Rock Cafe Intl Inc., 951 F.2d 684, 697 (5th Cir.1992)). "The prevailing party must demonstrate the exceptional nature of the case by clear and convincing evidence." CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60, 65 (5th Cir.1992).
Evidence of intentional infringement may establish an exceptional case. Tacv Cabana Int'l, Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1127 (5th Cir. 1991). However, even where a defendant knew he was using a trademark, the case may not be exceptional if the defendant believed in good faith that he was entitled to use that mark. Sovereign Order of Saint John v. Grady, 119 F.3d 1236, 1244 (6th Cir.1997) (cited in Am. Registry of Radiologic Technologists v. Garza, No. 05-287, 2006 U.S. Dist. LEXIS 29826, at *20 (S.D.Tex. May 12, 2006)); see also CJC Holdings, 979 F.2d at 65-66 (declining to adopt a rule that deliberate copying of a mark per se constitutes an exceptional case). A finding of willfulness for purposes of awarding statutory damages does not bind a court in determining whether or not a case is exceptional. Texas Pig Stands, Inc., 951 F.2d at 697.
As previously discussed, a genuine issue of material fact exists as to whether Lee acted willfully. See supra, III.B(3). Philip Morris does not allege that it suffered lost profits from Lee's conduct. See CJC Holdings, 979 F.2d at 66 ("[L]lack of damages is an important factor to consider in determining whether a case is exceptional."). Moreover, there is no evidence Lee profited or financially benefitted from the transaction.[24]See Moore Bus. Forms v. Ryu, 960 F.2d 486, 492 (5th Cir.1992) (declining to award attorney's fees where "there is no evidence that [the defendant] attempted to gain benefit or advantage by using [the plaintiff]'s trademark."). Thus, the Court finds a genuine issue of material fact as to whether the case against Lee is exceptional, and denies Philip Morris's request for an award of attorney's fees against Lee.
As to Castaneda, in addition to evidence that he willfully violated the Lanham Act, there is also clear and convincing evidence that he acted with a high degree of culpability. Unlike Lee, Castaneda was repeatedly told he could not lawfully import the cigarettes into the United States. Pl.'s Mot. Summ. J. App. Exs. C, 153-54; F, 41-47. Courts have declined to award attorney's fee where the defendant believed in good faith that he was entitled to use the plaintiffs trademark. See, e.g., Pebble Beach Co., 155 F.3d at 556 (declining to award attorney's fees where the defendant deliberately copied a mark but also placed a disclaimer on the goods bearing the mark, which the court concluded demonstrated a lack of an intent to deceive or cause confusion); Am. Registry of Radiologic Technologists, 2006 U.S. Dist. LEXIS 29826, at *20 (declining to award attorney's fees where the defendant believed in good faith that the trademark owner certified his use of its marks). Castaneda, in comparison, acted in bad faith by disregarding notice that his conduct was unlawful. Accordingly, the Court finds this case to be `exceptional' with regard to Castaneda, and grants Philip Morris's request for an award of attorney's fees against Castaneda.

D. Costs of Court
Under the Lanham Act, a plaintiff whose trademark has been infringed "shall be entitled" to recover costs. 15 U.S.C. § 1117(a). Accordingly, the Court awards Philip Morris the costs of court it incurred in prosecuting its case against Lee and Castaneda.

V. CONCLUSION
For the foregoing reasons, the Court enters judgment in favor of Philip Morris and against Defendants Lee and Castaneda. The Court finds that Philip Morris is entitled to a permanent injunction prohibiting Lee and Castaneda from importing, purchasing, distributing, selling, offering for sale, or otherwise using in commerce any counterfeit cigarettes bearing the Marlboro Marks, or in assisting, aiding, or abetting any other person or entity in doing so. In addition, the Court awards Philip Morris attorney's fees associated with the prosecution of its case against Castaneda. Finally, the Court the finds that Philip Morris is entitled to costs against both Lee and Castaneda.
Accordingly, IT IS ORDERED that Plaintiff Philip Morris USA Inc.'s "Motion for Summary Judgment Against Defendants William W. Lee and Felipe Castaneda" (Docket No. 229) is GRANTED IN PART and DENIED IN PART.
IT IS FURTHER ORDERED that judgment is entered in favor of Plaintiff Philip Morris USA Inc. against Defendants William W. Lee and Felipe Castaneda as to Counts I-VI.
IT IS FURTHER ORDERED that Plaintiff Philip Morris USA Inc. is GRANTED a permanent injunction against Defendants William W. Lee and Felipe Castaneda, prohibiting them from importing, purchasing, distributing, selling, offering for sale, or otherwise using in commerce any counterfeit cigarettes bearing the Marlboro Marks, or in assisting, aiding, or abetting any other person or entity in doing so.
IT IS FURTHER ORDERED that Plaintiff Philip Morris USA Inc. is GRANTED statutory damages and attorney's fees against Defendant Felipe Castaneda.
IT IS FURTHER ORDERED that Philip Morris is ordered to FILE with the Clerk of the Court declarations concerning the amount of attorneys' fees incurred in prosecuting its case against Castaneda pursuant to Local Rule CV-7(I).
IT IS FURTHERED ORDERED that Plaintiff Philip Morris USA Inc. is awarded all recoverable costs of court in the prosecution of its case against Defendants William W. Lee and Felipe Castaneda.
IT IS FURTHER ORDERED that Plaintiff Philip Morris USA Inc.'s Motion is DENIED insofar as it requests statutory damages and attorney's fees against Defendant William W. Lee.
IT IS FINALLY ORDERED that at the BENCH TRIAL set for December 17, 2007, in the above-captioned cause, the parties MAY SUBMIT evidence regarding whether, and in what amount, statutory damages and attorneys fees are appropriate against as Lee, as well as the appropriate amount of statutory damages against Castaneda.[25]
IT IS FURTHER ORDERED that Plaintiff Philip Morris USA Inc.'s "Objections to Affidavit of Defendant William W. Lee and Motion to Strike" are SUTAINED in part and OVERRULED in part, as set forth above.
NOTES
[1]  Though Castaneda's Response is untimely, the Court will consider it as though it had been timely filed.
[2]  The Partnership Agreement names Lee, Castaneda and John K. Jon ("Jon") as partners of Kagro. According to Lee's deposition testimony, Jon decided not to become a partner, and never signed the Agreement. Pl's Mot. Summ. J. App. Ex. B, 134.
[3]  As discussed infra in footnote 14, Castaneda's conviction, which occurred after the actions presently before the Court, has no bearing on his liability. Nonetheless, the conduct which formed the basis of that conviction took place prior to the underlying actions and, thus, attests to Castaneda's familiarity with cigarette distribution.
[4]  A master case of cigarettes contains fifty cartons. PI. Mot. Summ. J. ¶ 21 n. 3. In each carton, there are ten packages of cigarettes. Id.
[5]  Philip Morris's Second Amended Complaint identified the following parties as defendants: Synergy, Balea, Morrison, Lee, Castaneda, Martinez. Tominelli, Southwestern Cargo Services, Inc., and Motohiro Miyagi. Pl's Second Am. Compl. ¶ 1. Some of these defendants have since been dismissed by the Court.
[6]  Philip Morris also asserts claims against Lee and Castaneda based on Texas Business and Commerce Code § 16.26, which prohibits trademark infringement, and common law unfair competition.

The elements of trademark infringement under Texas law are identical to those under the Lanham Act. Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 193 (5th Cir.1998) (citing Zapata Corp. v. Zapata Trading Int'l Inc., 841 S.W.2d 45, 47 (Tex.App.1992)). Additionally, "the same facts which would support an action for trademark infringement would also support an action for [common law] unfair competition." Marathon Mfg. Co. v. Enerlite Prods. Corp., 767 F.2d 214, 217 (5th Cir.1985).
Accordingly, the Court's analysis of Philip Morris's Lanham Act claims applies similarly to its state statutory and common law claims. The Court will refer to all three claims as the "Lanham Act."
[7]  15 U.S.C. § 1115(b) sets forth the following defenses, none of which are applicable here:

(1) the registration of the mark was obtained fraudulently;
(2) the mark has been abandoned by the registrant;
(3) the registered mark is used with the permission of the registrant;
(4) that the use of the name charged to be an infringement is a use, otherwise than as a mark, of the party's name in his own business;
(5) that the mark whose use by a party is charged as an infringement was adopted without knowledge of the registrant's prior use;
(6) that the mark whose use is charged as an infringement was registered and used prior to the registration under this Act;
(7) that the mark has been or is being used to violate the antitrust law of the United States;
(8) that the mark is functional; or
(9) that equitable principles, including laches, estoppel, and acquiescence, are applicable
[8]  U.S. Patent No. 68,502 (filed Oct. 17, 1907).
[9]  U.S. Patent No. 938,510 (filed July 25, 1972).
[10]  Castaneda is also liable for importing counterfeit goods in violation of the Lanham Act, 15 U.S.C. § 1124. To prevail, Philip Morris must show that Castaneda imported goods bearing copies of the Marlboro Marks without Philip Morris's consent. See 15 U.S.C. § 1124. Having already concluded that Castaneda arranged to import counterfeit cigarettes into the United States, the Court is of the opinion that he is likewise liable for violating 15 U.S.C. § 1124, and that Philip Morris is entitled to summary judgment on this claim.
[11]  Philip Morris requests a permanent injunction prohibiting Lee and Castaneda from "importing, purchasing, distributing, selling, offering for sale, or otherwise using in commerce any counterfeit cigarettes bearing the Marlboro Marks, or in assisting, aiding[,] or abetting any other person or entity in doing so." Pl's Mot. Summ. J. ¶ 56.
[12]  In addition to the Second Circuit, the Third, Seventh and Eleventh Circuits have also adopted the doctrine of willful blindness within the context of Lanham Act violations. See, e.g., Gucci Am., Inc. v. Daffy's, Inc., 354 F.3d 228, 231 (3d Cir.2003); Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1148 (7th Cir.1992); Chanel, Inc. v. Italian Activewear of Florida, Inc., 931 F.2d 1472, 1476 (11th Cir.1991).
[13]  Philip Morris alleges that Lee fraudulently obtained funds to purchase the goods from Synergy. Pl.'s Mot. Summ. J. ¶ 8. Based on this allegation, Philip Morris contends that "Lee's willingness to violate federal and state laws against wire fraud in order to purchase the counterfeit cigarettes only corroborates his willingness to violate federal and state laws against importing those cigarettes into the United States." Id. at ¶ 53. This evidence is inadmissible under Federal Rule of Evidence 404(b), which prohibits evidence of other crimes, wrongs or acts "in order to show action in conformity therewith." FED. R. Ev. 404(b). Philip Morris uses Lee's allegedly fraudulent conduct only to show that insofar as he may have violated federal law in one context, he more likely than not violated federal law in the present action. On this basis, this evidence is inadmissible.
[14]  While the Court recognizes that a defendant's prior conviction for trafficking counterfeit cigarettes may establish willful conduct, Philip Morris USA, Inc. v. Lin, No. CV-03-8923 CAS, 2004 U.S. Dist. LEXIS 29903, at *19-20, Castaneda was not convicted until after the underlying transactions took place. Therefore, his prior conviction cannot be evidence of willful conduct.
[15]  Martinez's state of mind is not evidence that either Lee or Castaneda acted willfully.
[16]  Philip Morris objects to this statement as irrelevant. Pl.'s Obj. ¶ 6(H). The Court overrules this objection because the statement attests to Lee's knowledge, which is relevant to determining whether he acted willfully.
[17]  Philip Morris objects to these statements as conclusory and irrelevant. Pl.'s Obj. ¶ 6(K). The Court overrules these objections as the challenged statements draw no conclusions and are relevant to Lee's state of mind.
[18]  Philip Morris objects to these business cards as hearsay evidence. Pl.'s Obj. ¶ 6(K). The Court overrules this objection because the cards are not being introduced for the truth of the matter asserted.
[19]  Philip Morris objects to this portion of Lee's affidavit on the grounds that it is conclusory. Pl.'s Obj. ¶ 6(D). The Court overrules this objection because the statement is one of personal impression.
[20]  Philip Morris objects to this portion of Lee's affidavit on the grounds that it is conclusory and constitutes hearsay. Pl.'s Obj. ¶ 6(C). In the challenged portion. Lee draws no conclusions. Moreover, Lee's assertions that "[Castaneda] never told [him] he had contacts at the Houston Port of Entry or with UPS [and] never intimated to [him] that he had `greased the skids,'" Lee's Resp. to Pl.'s Mot. Summ. J. Lee Aff. ¶ 4, are not hearsay because they do nol refer to any out-of-court statements. Therefore, the Court overrules Philip Morris's objection.
[21]  Philip Morris objects to the portion of Lee's affidavit attesting to his state of mind because it allegedly contradicts his deposition testimony. Pl.'s Obj. ¶ 6(D). The Court overrules this objection because it finds Lee's affidavit and deposition testimony to be consistent.
[22]  Philip Morris objects to the portion of Lee's affidavit relating to these issues on the grounds that his statements are conclusory. Pl.'s Obj. ¶ 6(E). The Court overrules this objection because it finds that the statements are based on Lee's personal knowledge.
[23]  Lee identifies a list of factors which he argues the Court must consider in determining the appropriate amount of statutory damages. Lee's Resp. to Pl.'s Mot. Summ. J. ¶ 4. These factors are relevant to determining "whether an award of profits under § 1117(a) is appropriate." Rolex Watch USA Inc., 158 F.3d at 823. Because Philip Morris does not seek an award of profits under § 1117(a), the Court is not bound and declines to consider these factors.
[24]  The Court denies Philip Morris's objection as to Lee's testimony relating to the absence of profits on the grounds that it is conclusory, Pl.'s Obj. ¶ 6(L). None of the statements upon which the Court relies assert conclusions of either fact or law. Rather, they are statements based on Lee's personal knowledge.
[25]  On May 21, 2007, the Court entered a Scheduling Order setting the case for a bench trial on December 17, 2007. See Docket No. 184. On December 6, 2007, the Court sent a letter to counsel for both parties indicating that the case would proceed to trial on the aforementioned issues. See Docket No. 258. A bench trial was held December 17-18, 2008, and this Memorandum Opinion and Opinion is issued thereafter.


377 S.W.2d 393 (1964)
Samuel E. HOLT and Frances-Jean P. Holt, (Plaintiffs) Appellants,
v.
QUEEN CITY LOAN & INVESTMENT, INC., (Defendant) Respondent.
No. 50132.
Supreme Court of Missouri, Division No. 1.
April 13, 1964.
*394 Samuel E. and Frances-Jean P. Holt, pro se.
Sam F. Hamra, Jr., James K. Prewitt, Miller, Fairman, Sanford, Carr & Lowther, Springfield, for respondent.
HOLMAN, Judge.
In this equitable action plaintiffs sought a decree whereby they would recover certain notes transferred by them, and also a judgment for damages in the sum of $20,000. The controversy grew out of a transaction wherein plaintiffs agreed to purchase certain improved real estate located in Spring-field, Missouri, from Dr. Kenneth Berg. They now contend that Berg made false and fraudulent representations in regard to certain phases of the transaction for which defendant is legally responsible. Defendant, Queen City Loan & Investment, Inc., filed a counterclaim seeking a judgment for payments collected by plaintiffs upon a note alleged to have been owned by it, and for other relief. The trial court found for defendant on plaintiffs' petition and also on its counterclaim. Plaintiffs have appealed from the ensuing judgment.
*395 Plaintiffs have filed a pro se brief in this court. Defendant has filed a motion to dismiss the appeal based upon the failure of plaintiffs' brief to comply with Civil Rule 83.05, V.A.M.R. While said brief is deficient in some respects we have decided that we will not impose the drastic penalty sought and the motion is accordingly overruled.
Plaintiffs were the owners of the Sheridan Hills Motel in Tulsa, Oklahoma. Early in June 1960 they sold that motel and as a part of that transaction received certain notes upon which was due a total of approximately $100,000. At about that time plaintiffs were contacted by two real estate agents who represented Dr. Berg of Springfield, Missouri. As a culmination of negotiations with Berg plaintiffs entered into a contract whereby it was agreed that Berg would construct two 12-unit apartment buildings in the outskirts of Springfield, Missouri, and, upon their completion he would convey them to plaintiffs, subject to a $75,000 mortgage which would be placed on each apartment building. Plaintiffs were also to receive the equity in a certain residence located in Springfield. In consideration for these properties plaintiffs agreed to place in escrow with the Citizens Bank of Springfield, the following: (1) $2,000 in cash; (2) a note in the sum of $52,000 signed by Rachel Clifton and Paul C. Vaught, payable to plaintiffs and secured by a fourth mortgage on the aforementioned motel; (3) a note in the sum of $8,500 signed by Rachel Clifton and Paul Vaught, payable to plaintiffs, which was also secured by the fourth mortgage mentioned in (2) above; and (4) a note signed by Eddie Clifton, payable to Rachel Clifton and assigned to plaintiffs, on which there was a balance due of approximately $31,500. This note was secured by certain shares of stock and by policies of life insurance. As part of the same transaction a deed, executed by Dr. Berg and his wife conveying to plaintiffs the lots upon which the apartment buildings were to be constructed, was deposited in escrow with the Citizens Bank. Under the escrow agreement the money and notes deposited by plaintiffswere to be delivered to Dr. Berg, and the aforementioned deed was to be delivered to plaintiffs upon the culmination of the real estate sales contract which had been entered into by said parties.
Dr. Berg began the construction of the two apartment buildings in June of 1960. For the purposes of this opinion these structures will be referred to as the "east apartment" and the "west apartment." There were two other apartment buildings being constructed by Dr. Berg which were located between the two buildings plaintiffs had agreed to purchase. The residence property plaintiffs were to receive was conveyed to them and they were residing there at the time of trial. It was conveyed subject to a deed of trust upon which was due approximately $12,000. In the fall of 1960 plaintiff (we hereinafter refer to Samuel E. Holt as plaintiff) indicated to Berg that he was dissatisfied with the interior finishing of the east apartment and as a result of that complaint it was agreed that plaintiff would supervise the interior finishing of that building. Plaintiff was involved in that work for at least 30 days. Dr. Berg was successful in obtaining a $75,000 loan on each of the apartment buildings from Phoenix Mutual Life Insurance Company, the loan on the east apartment being disbursed on September 26, 1960, and the one on the west apartment being disbursed on October 26, 1960.
Early on the morning of October 31, 1960, Dr. Berg called plaintiff and requested that he meet him at the Colonial Hotel for a conference in regard to the apartment projects. In that conference Dr. Berg told plaintiff that the east apartment had been completed and the west apartment was substantially completed and asked him if he would supervise the finishing of that building. Plaintiff agreed to do so and Berg gave him a check for $5,000 to guarantee payment of the expenses of completing work on that apartment. Dr. Berg at that time asked plaintiff to authorize the *396 delivery of the securities held in escrow by the Citizens Bank, it being then agreed that they would make a joint inspection of the apartment buildings immediately after the securities were transferred. In compliance with Dr. Berg's request plaintiff went with him to the Citizens Bank and they obtained the release of the items in escrow, and plaintiff went home and brought his wife to the office of defendant where they signed all the papers necessary to transfer ownership of the securities to Dr. Berg. After taking his wife home plaintiff returned to the office of defendant to meet Dr. Berg and make the inspection of the apartment buildings, but was told that Dr. Berg was busy and that they would have to make the inspection later. Accompanied by William Gabler, the general manager of defendant, plaintiff and Dr. Berg inspected the apartment buildings on November 4. Plaintiff testified that upon inspection of the west apartment he found many matters of a minor nature that were unsatisfactory and, with the help of Mr. Gabler, he discovered a major defect, viz., a large crack in the foundation; that upon discovering the condition of the west apartment he stated that he would not accept the building and demanded the return of the notes he had assigned on October 31; that Dr. Berg then told him he had assigned them to the defendant immediately after they had been assigned to him and that he therefore could not return them.
After an extended period of negotiation it was agreed between Dr. Berg and plaintiffs that plaintiffs would accept the east apartment building, and that in lieu of the west apartment Dr. Berg would transfer to plaintiffs certain shares of stock which were to have an agreed value of $46,000 and a note for $4,000. Plaintiffs, as a result of this agreement, did receive 13,000 shares of stock in Commonwealth Loan & Investment Company. Apparently, those were represented to have a value of $2 per share, although there was evidence to indicate that they were later found to be worth less than that amount. Other shares of stock which Dr. Berg had agreed to deliver to plaintiffs were apparently not delivered; however, there is some evidence that he tendered 14,000 shares of stock in the defendant company but that those shares were not accepted because of a dispute or misunderstanding as to whether plaintiffs should receive voting or nonvoting stock. Plaintiff also testified that after he began the operation of the east apartment building it was discovered that the septic tank was inadequate and that he was required to spend $2,000 to correct the defect in that regard.
Plaintiffs' petition was in three counts. Count I sought a recovery against defendant upon the theory that Dr. Berg was the agent of defendant in regard to the matters relating to the sale of the aforementioned apartment buildings. The theory of Count II was that defendant had knowledge of the defect in Dr. Berg's title to the notes and hence was not a holder in due course. In Count III it was alleged that Dr. Berg and defendant were engaged in a joint adventure in regard to the transaction in question. The relief sought in each count was the same, i. e. (1) that the endorsement and assignments of the promissory notes to Dr. Berg and to the defendant be cancelled and declared invalid; (2) that plaintiffs be declared to be the owners of said notes; (3) that plaintiffs recover all payments made to defendant on said promissory notes; and (4) that plaintiffs recover damages from the defendant in the sum of $20,000. In their pleadings and testimony plaintiffs offered to comply with any requirements made by the court in order that equity be accomplished.
Defendant filed a counterclaim in three counts. The first count was dismissed before trial. In the second count defendant sought to recover from plaintiffs $8,000 which it alleged they had collected on a note theretofore assigned to defendant. In count three defendant sought a declaratory judgment to the effect that it was the sole owner of the notes that Dr. Berg had assigned *397 to it and that plaintiffs had no right, title, or claim thereto.
The evidence upon which plaintiffs relied in an effort to prove agency and joint adventure between Dr. Berg and the defendant, as well as notice of the fraud involved, will now be stated. Dr. Berg was referred to in the evidence as being a major stockholder of the defendant corporation. Plaintiff testified that from June until September 1960 he often met Dr. Berg at defendant's office; that during that period he would call Dr. Berg at defendant's office and if he was not there would leave word for him to return the call; that during that time Dr. Berg had no other office except the use he was making of defendant's office; that in September 1960 Dr. Berg opened his own office at a location next door to the office of defendant. On cross-examination, however, plaintiff stated that no one at the office of defendant ever told him that Dr. Berg was an officer, director, or employee of the defendant.
Mrs. Betty Chase, an employee in the office of defendant, testified that William Gabler was general manager of the defendant company from June 1960 until April 1961; that the records of the defendant show that defendant purchased the notes (which were in escrow at that time) from Dr. Berg on July 19, 1960; that at that time loans which defendant had made to Dr. Berg in the amount of $15,000, $9,495, and $8,300 were cancelled; that a certificate was issued to Dr. Berg for 12,519 shares of "B" stock in defendant corporation at a value of $3 per share, or a total value of $37,557; that the value of the stock and the amount of loans cancelled totalled $70,352, which amount defendant's records showed was the consideration paid for the assets received from Dr. Berg, and which amounted to a discount of 26.3% upon the face value of said assets; that Dr. Berg's notes were not marked paid by defendant until October 31, 1960.
Donald Heizelman testified that he was foreman for Dr. Berg on the apartment buildings project from May 1960 until October 20, 1960; that William Gabler would come out once or twice a week and look at the apartments, often accompanied by Dr. Berg; that if Dr. Berg was not available Gabler would sometimes make minor decisions concerning the project, although all important final decisions were made by Dr. Berg; that about the middle of September Dr. Berg and Gabler told him of the crack in the foundation of the west apartment and Gabler said that if plaintiff saw the crack he would "back out" of the deal; that he did not tell plaintiff about this crack. He stated that the arrangement he had with Dr. Berg was that he would pay the bills for labor and material out of his personal bank account and Dr. Berg would give him a check from time to time to cover the amounts he had paid out; that on several occasions Dr. Berg left signed checks with Mr. Gabler and Gabler would fill out the check for an amount sufficient to cover the "bills which I needed to pay, and deliver the same to me." On cross-examination this witness stated that Dr. Berg never represented to him that he was an agent, employee, or director of the defendant corporation.
William Gabler was called as a witness for the defendant and stated that Dr. Berg came to the office of defendant in July 1960 and talked with him and with Mr. Gatlin (another officer of defendant company) about selling the notes in escrow to the defendant; that he went to the Citizens Bank with Dr. Berg and examined the documents in question; that an arrangement was then worked out whereby, if Dr. Berg fulfilled his agreement with plaintiffs and obtained the documents that were in escrow, defendant would purchase same; that the consideration was to be the cancellation of certain loans Dr. Berg had with the defendant and an additional amount of stock in the defendant company. He stated that the first time he saw the crack in the west apartment building was during the early part of November; that after plaintiffs refused to accept the west apartment it was purchased *398 from Dr. Berg by Commonwealth Loan & Investment, Inc., which company he also represented; that the crack was repaired at a cost of $2,700; that he never filled out any checks for Dr. Berg but that it was entirely possible that Dr. Berg had left one or more checks at the office for foreman Heizelman to pick up.
Defendant also presented Frank Brewster and Robert Killian, both of whom were directors of the defendant, and each of these witnesses testified that Dr. Berg was not an officer, director, or employee of the defendant during the period here involved. Dr. Berg was not a defendant in this action and did not testify. Apparently, he left Springfield before the trial of this case.
In regard to the issues raised in the second count of defendant's counterclaim plaintiff testified that he continued to receive the payment of $500 per month on the Eddie Clifton note after October 31, 1960, until November 1951, and also received an additional payment of $1,071.25 in April 1961, but that he paid $750 of the amount collected to Dr. Berg.
The findings and decree of the trial court included the following:
"The first issue to be decided by the court is whether or not this defendant is a holder in due course of the notes in question. If the defendant is such a holder, all of the many other issues raised in this case have no bearing on the final judgment.
"The court finds that on the date these securities were endorsed over to this corporate defendant, the defendant became a holder in due course for value. * * *
"There is no evidence that the officers and agents of the defendant corporation would have any reason to believe or suspect that the plaintiff, who was in actual charge of the completion of the apartment houses, was being, or could be, defrauded as to their condition. It is true that the defendant company did not give face value for these securities, but securities of this nature (a fourth mortgage) are commonly discounted quite heavily. * * *
"It seems obvious that the transaction of July 19, 1960, between the defendant corporation and Dr. Berg was a conditional sale of the securities in question. * * * On October 31, 1960, the conditional contract was completed by the physical delivery and endorsement of the securities to the defendant, and Dr. Berg received the stock in defendant corporation.
"On Count II of defendant's counterclaim, the court finds that the plaintiffs have received all the payments on the Eddie Clifton note, even though defendant has been the legal owner of the note since October 31, 1960. However, the plaintiff testified, without contradiction, that the parties hereto agreed that he should keep the payments through December 1960, that the January 1961 payment went half to him and defendant, that the defendant and Dr. Berg received the February 1961 payment, and that thereafter plaintiffs received eight monthly payments of $500.00 each, and one additional payment of $1,071.25, a total of $5,071.25. * * *
"It is ordered, adjudged and decreed that the defendant have judgment on Counts I, II, and III of plaintiffs' petition; that the defendant have a judgment on Count II of defendant's counterclaim against plaintiffs in the amount of $5,071.25; and that defendants have judgment on Count III of defendant's counterclaim declaring defendant to be the sole owner of the securities described therein."
We will first consider whether defendant was a holder in due course of the notes in question. The $52,500 note was dated June 10, 1960, and the first principal installment would not become due until 84 months after its date. The Eddie Clifton note was dated January 31, 1958, and was payable in monthly installments which had been paid as they fell due. The $8,500 note was dated June 10, 1960, and was payable "on or before 90 days after date." It was paid while being held in escrow. Defendant *399 did not receive this note but received the amount collected thereon in accordance with the conditional purchase arrangement entered into with Dr. Berg on July 19, 1960. For the purposes of this case we will consider that this note was assigned to defendant before maturity.
The rules of law applicable in our determination of the question presented are well established. It has been settled since the early case of Hamilton v. Marks, 63 Mo. 167, that "both upon principle and authority, and from the experience of jurists and commercial men, and the interests of the affairs of business life, it is safe to say that the liberal doctrine which promotes the free circulation of negotiable instruments, is the best, and that the good faith of the transaction should be the decisive test of the holder's rights." 63 Mo. 178. In accord with the principle stated in Hamilton, "[I]t was firmly settled long ago, beyond room for argument now, that the purchaser of a negotiable promissory note procured by fraud may not be charged with notice of an infirmity or defect by showing that he was negligent in taking the instrument or that he acquired it with knowledge of facts and circumstances that would arouse the suspicion of an ordinarily prudent person, and that nothing short of actual knowledge or bad faith will defeat the title of such purchaser. Of course, actual knowledge may be inferred from the facts and circumstances surrounding acquisition of the note but not `from things that would merely put a prudent man on inquiry.' Commerce Trust Co. v. McGirk State Bank, 222 Mo.App. 8, 300 S.W. 526, 527(4)." Local Finance Co. v. Charlton, Mo.App., 289 S.W.2d 157, 160. See also Jennings v. Todd, 118 Mo. 296, 24 S.W. 148, Dull v. Johnson, Mo.App., 106 S.W.2d 504, and Downs v. Horton, Mo.App., 209 S.W. 595, approved on transfer, 287 Mo. 414, 230 S. W. 103. The applicable statutory provisions are in accord with the long-established case law of this state. See §§ 401.052, 401.056, and 401.057 (all statutory references are to RSMo 1959, V.A.M.S.).
We agree with the conclusion of the trial court that defendant, on October 31, 1960, became a holder in due course of the notes in question. There certainly was no proof of actual knowledge on its part of any fraudulent representations Dr. Berg may have made to plaintiffs. The only testimony concerning a fact which might have aroused its suspicion was that of Mr. Heizelman to the effect that Mr. Gabler knew of the crack in the west apartment in September 1960. That was denied by Gabler who stated that he first learned of the crack in early November. However, even if we accept the Heizelman testimony, such would not be sufficient to warrant an inference of bad faith on the part of defendant. It is undisputed that defendants knew that these notes were in escrow and were not to be delivered to Dr. Berg until he complied with his contract. In that situation it would have been reasonable for defendant to assume that plaintiffs would not authorize the release of the notes and thereafter assign them to Dr. Berg unless they had inspected the buildings and had required Dr. Berg to make arrangements for the repair of any apparent defects, such as the foundation crack of which plaintiffs thereafter complained.
As indicated, we hold that defendant was a holder for value in due course of the aforementioned notes, and it therefore follows that it holds them "free from any defect of title of prior parties, and free from defenses available to prior parties * * *." § 401.057.
The evidence in this record offered for the purpose of showing that Dr. Berg was acting as agent for defendant in constructing these apartment buildings is not convincing. "[T]here is no presumption of agency and the burden of establishing it is always on the party by whom it is alleged to exist." Martin v. Mercantile Trust Co., Mo.Sup., 293 S.W.2d 319, 325. There was no evidence of an express agreement of agency. Officers and directors of defendant testified that Dr. Berg *400 was not an agent of defendant. There is no evidence that Dr. Berg ever represented that he was acting as defendant's agent. It is true that Dr. Berg was one of defendant's stockholders and used its offices in transacting some of his business. Also, defendant loaned money to Dr. Berg and therefore took some interest in the progress of the apartment construction project here involved. However, those circumstances are not sufficient to convince us that Dr. Berg was acting as defendant's agent and we accordingly rule that contention adversely to plaintiffs.
We will next consider the contention that the relationship between Dr. Berg and defendant was a joint adventure. "A `joint adventure' is founded entirely on contract, either express or implied. It can exist only by the voluntary agreement of the parties to it. * * * It is in the nature of a partnership, generally governed by the same rules of law, the principal difference being that a joint adventure is usually limited to a single transaction. As a general rule, in order to constitute a joint adventure, there must be a community of interest in the accomplishment of a common purpose, a mutual right of control, a right to share in the profits and a duty to share in such losses as may be sustained." Gales v. Weldon, Mo.Sup., 282 S.W.2d 522, 527. The evidence has been heretofore stated in some detail and will not be here repeated. It is sufficient to state that it fails to prove the various elements essential to a finding that a joint adventure existed in this case.
Plaintiffs have briefed the contention that the transaction whereby defendant purchased the notes in question from Dr. Berg was illegal because a part of the consideration was the cancellation of certain loans which defendant had made to Dr. Berg in violation of § 351.165. That section provides that " * * * no loan of money shall be made by the corporation to any shareholder therein; and if such loan shall be made to a shareholder, the officers making it, or who shall assent thereto, shall be jointly and severally liable to the corporation for the repayment of such loan and interest." Statutes of that nature are generally held to be directory only and loans made in contravention thereof are not void. Graham v. Young, 35 Del. 484, 167 A. 906. The penalty is that prescribed in the statute. Ward v. National Ice Cream Co., Mo.Sup., 246 S.W. 554. Dr. Berg voluntarily paid those loans by selling the instant notes to defendant. We hold that the sale of said notes was not void or illegal because a part of the consideration was the payment or cancellation of loans that had been made to Dr. Berg in violation of § 351.165.
Plaintiffs also contend that defendant had no right to purchase the instant notes because no "Certificate to Commence Business" was issued to it during the year 1960. This is not an issue raised by the pleadings and no proof appears in the transcript supporting said contention. In that situation we must rule this point against plaintiffs.
The third point in plaintiffs' brief reads as follows: "The court erred in not permitting plaintiffs to implead Kenneth Paul and Jeanne M. Berg as third-party defendants." There is no citation of authority to support that contention and it is not developed in any manner in the argument. The point is therefore deemed abandoned. Civil Rule 83.05, V.A.M.R.; Lansford v. Southwest Lime Co., Mo.Sup., 266 S.W.2d 564.
Plaintiffs' next contention is that "the court erred in becoming impatient, pushing and hurrying counsel, and ordering that attorneys stipulate as to exhibits, wrongfully stating that the court had repeatedly requested that counsel stipulate, and stating on more than one occasion that there was no evidence of fraud or knowledge thereof presented when indeed there had been, causing [the] attorney for plaintiffs to become confused, uncertain and rattled and thereby resulting in the failure *401 of the introduction of evidence, issues and objections for and in behalf of the plaintiffs." We have carefully read the transcript and have considered it in the light of the quoted contention and conclude that the point is without merit. During most of the trial the court demonstrated unusual patience in permitting the attorneys on each side the privilege of presenting their evidence to the extent and in the manner desired by counsel. Near the end of the presentation of plaintiffs' evidence the court stated to counsel that four other cases were set for that week and it was therefore necessary that the case on trial proceed with dispatch. A short time later the court expressed dissatisfaction with the fact that much of the evidence did not have anything to do with the question of defendant's knowledge or lack of knowledge "of any fraud in the transaction." Thereafter, the court also called attention to the fact that counsel had stated to the court that they did not need a pretrial conference because they could stipulate to certain facts, and stated that the court was now unable to get counsel to stipulate as to records that were not in dispute. As a result of the ensuing colloquy, it was agreed that plaintiffs' counsel could thereafter furnish photostatic copies of certain of defendant's office records which plaintiffs desired be considered in evidence.
The trial court is possessed with considerable discretion in matters concerning the conduct of the trial. "It is a long established rule that the determination of matters pertaining to the actual conduct of the trial of a cause is left by the law largely to the discretion of the trial judge. In the very nature of the matter this must necessarily be the rule, and appellate courts are not authorized to interfere with the exercise of such discretion on the part of a trial judge unless it clearly appears that he has abused his discretion." Koeppel v. Koeppel, Mo.App., 208 S.W.2d 929, 936. We are convinced that the trial court did not abuse its discretion in regard to the matters herein complained of. As indicated, we rule this point against plaintiffs.
Another point briefed by plaintiffs is that "the court erred in not finding that the defendant was unjustly enriched in its finding that `securities of this nature (a fourth mortgage!) are commonly discounted quite heavily.'" In connection with that contention we observe that unjust enrichment was not one of plaintiffs' pleaded grounds for recovery. Also, the fact that defendant purchased these notes at a discount would not preclude a finding that it was a holder in due course, for value, of said notes. Therefore, the finding (or judicial notice) of the trial court that "securities of this nature (a fourth mortgage) are commonly discounted quite heavily" was not essential to the court's conclusion that the defendant was a holder of the notes in due course. We will therefore not extend this already long opinion by determining whether the trial court was warranted in finding, or taking judicial notice of the fact, that securities of the nature here involved are commonly discounted quite heavily.
The next point briefed by plaintiffs is that "the court erred in finding that `the plaintiff husband had every opportunity to acquaint himself with the physical condition of the apartment houses on every day for months prior to the date of the transfer of the securities.'" This finding was not essential to the court's conclusion that defendant was a holder of the notes in due course. However, the uncontradicted evidence clearly shows that plaintiff had every reasonable opportunity to acquaint himself with the condition of those buildings. He was living in Springfield and visited the project frequently. For about a month prior to October 31, 1960, he worked on the east apartment which was located a short distance from the west apartment. He may have failed to acquaint himself with the condition of both structures, but he undoubtedly had the opportunity to do so. We rule this point against plaintiffs.
*402 Plaintiffs have made other points in their brief concerning allegedly erroneous findings (which were not essential to the judgment) and complain of the failure of the trial court to give proper consideration to certain evidence offered by them. We overrule those contentions without further specific discussion. It is sufficient to state that the trial court found the essential facts to support the judgment in favor of defendants. We not only defer to the trial court in that regard, but have independently arrived at the same conclusion.
In their motion for new trial plaintiffs sought a new trial because of newly discovered evidence. Several weeks after the motion was filed they filed five affidavits in support of that assignment. It appeared from those affidavits that the persons who signed them would have testified that Mr. Gabler knew of the foundation crack before October 31, 1960, and that he sometimes gave orders to the workmen on the project.
Civil Rule 78.03 provides that affidavits supporting a motion for new trial "shall be served with the motion." The rule was not complied with in this instance and therefore the affidavits should be disregarded. Tuttle v. Tomasino, Mo.Sup., 336 S.W.2d 683 [1].
However, even if the affidavits are considered, they do not afford a basis for holding that the trial court abused its discretion in denying a new trial on the ground assigned. "It is well settled that a party who seeks a new trial on such ground should (to obtain such relief) be required to show: (1) that the evidence has come to his knowledge since the trial; (2) that it was not owing to the want of due diligence that it did not come sooner; (3) that it is so material that it would probably produce a different result if the new trial were granted; (4) that it is not cumulative only; (5) that the affidavit of the witness himself should be produced, or its absence accounted for; and (6) that the object of the testimony is not merely to impeach the character or credit of a witness." Young v. St. Louis Public Service Co., Mo.Sup., 326 S.W.2d 107, 111. In this case there was no showing of any reasonable excuse as to why this testimony could not have been obtained, with diligence, prior to trial. Also, the testimony would have been merely cumulative in that the same facts appear in the testimony of Mr. Heizelman. Another function of the proposed testimony would have been merely to impeach the credit to be given to the testimony of Mr. Gabler. We are also of the opinion that such testimony would probably not produce a different result if a new trial were granted. For the reasons stated, we rule that the trial court did not err in refusing to grant a new trial because of newly discovered evidence.
The judgment is affirmed.
All concur.