Construction Fabrication, LLC v. Republic Bank and Trust Company ( 2021 )

RENDERED: OCTOBER 29, 2021; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-1610-MR
CONSTRUCTION FABRICATION,
LLC; RALPH A. JEKEL; AND
RONALD B. STONE APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE AUDRA J. ECKERLE, JUDGE
ACTION NO. 20-CI-002749
REPUBLIC BANK AND TRUST
COMPANY APPELLEE
OPINION
AFFIRMING
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BEFORE: CALDWELL, CETRULO, AND JONES, JUDGES.
JONES, JUDGE: Construction Fabrication, LLC (“Construction Fabrication”);
Ralph A. Jekel (“Jekel”); and Ronald B. Stone (“Stone”) (collectively
“Appellants”) appeal from an order of the Jefferson Circuit Court granting
summary judgment to Republic Bank and Trust Company (“Republic”) in this debt
collection action. We affirm.
I. BACKGROUND
On February 14, 2019, Construction Fabrication entered into a
business loan agreement, commercial security agreement,1 and promissory note
with Republic. Jekel and Stone signed the documents in their representative
capacity as members (vice president and president, respectively) of Construction
Fabrication. On the same date, Jekel and Stone guaranteed the loan by signing
separate commercial guaranties. On February 25, 2020, a financing statement was
filed with the Kentucky Secretary of State. Under the terms of the promissory
note, the principal amount of the loan from Republic to Construction Fabrication
was $87,000.00. Construction Fabrication agreed to make eleven regular monthly
payments of $1,060.65, and one last irregular or balloon payment estimated at
$82,169.81. The interest rate was 8.0% per annum based on a year of 360 days.
The maturity date of the loan, listed in bold typeface at the top of the first page of
each document, was February 14, 2020.
Although consistent in their monthly payments, Construction
Fabrication failed to make the final balloon payment. Republic issued a formal
demand to Appellants, but the balance remained unpaid. On April 30, 2020,
Republic filed the underlying complaint in Jefferson Circuit Court. Appellants
1
The security agreement gave Republic a security interest in all inventory, chattel paper,
accounts, equipment, and general intangibles of Construction Fabrication.
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filed a joint answer, but failed to bring any counterclaims. On June 17, 2020,
Republic moved for summary judgment. An affidavit filed with the motion from
Robert Cline, Senior Vice President of Republic, stated Appellants owed
$84,100.03 as a result of their default. Republic also filed the business loan
agreement, commercial security agreement, promissory note, and individual
guaranties with its motion for summary judgment. In response, Appellants
motioned the circuit court to allow them to amend their answer to include
counterclaims for fraud and breach of contract. The circuit court denied
Appellants’ motion and granted summary judgment in favor of Republic.
Appellants filed a motion to alter, amend, or vacate the order, which was also
denied by the circuit court. This appeal followed. Further facts will be developed
as necessary.
II. STANDARD OF REVIEW
When a circuit court grants a motion for summary judgment, the
standard of review for the appellate court is de novo because only legal issues are
involved. Hallahan v. The Courier Journal, 138 S.W.3d 699, 705 (Ky. App.
2004). We must consider the evidence of record in the light most favorable to the
non-movant (i.e., Appellants) and determine whether the circuit court correctly
found there was no genuine issues as to any material fact and that the moving party
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was entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779, 780
(Ky. App. 1996).
Whether the circuit court erred by denying Appellants’ motion to
amend their answer is reviewed for an abuse of discretion. See Lambert v.
Franklin Real Estate Co., 37 S.W.3d 770, 779 (Ky. App. 2000). “The test for
abuse of discretion is whether the trial judge’s decision was arbitrary,
unreasonable, unfair, or unsupported by sound legal principles.” Commonwealth v.
English, 993 S.W.2d 941, 945 (Ky. 1999).
III. ANALYSIS
Appellants raise three issues on appeal. They contend the circuit court
erred by (1) granting Republic’s motion for summary judgment; (2) granting
personal judgment against Jekel and Stone; and (3) denying Appellants’ motion to
amend their answer.
Turning to Appellants’ first argument, their primary contention is that
the matter was not ripe for summary judgment because they did not conduct
discovery. Appellants quote Pendleton Bros. Vending, Inc. v. Commonwealth
Finance and Admin. Cabinet, 758 S.W.2d 24, 29 (Ky. 1988), for the rule that “[a]
summary judgment is only proper after a party has been given ample opportunity
to complete discovery, and then fails to offer controverting evidence. Hartford Ins.
Group v. Citizens Fidelity Bank & Trust Co., Ky. App., 579 S.W.2d 628 (1979).”
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However, in clarifying Hartford, this Court stated, “[t]he key word is opportunity.
It is not necessary that the movant for a summary judgment show that it would be
impossible for the respondent to produce any evidence.” Hasty v. Shepherd, 620
S.W.2d 325, 327-28 (Ky. App. 1981) (internal quotation marks and citation
omitted). Republic filed its complaint in the circuit court on April 30, 2020;
Appellants filed an answer on May 18, 2020; and Republic filed its motion for
summary judgment on June 17, 2020. Appellants had ample opportunity to
propound discovery requests prior to the date Republic filed its motion for
summary judgment, but failed to do so. Contrary to Appellants’ assertions to this
Court, the record before the circuit court was complete and the matter was ripe for
summary judgment.
Although Appellants argue they dispute the amount owed to Republic,
the party opposing summary judgment “cannot rely on the hope that the trier of
fact will disbelieve the movant’s denial of a disputed fact, but must present
affirmative evidence in order to defeat a properly supported motion for summary
judgment.” Steelvest, Inc. v. Scansteel Service Center, 807 S.W.2d 476, 481 (Ky.
1991) (internal quotation marks and citation omitted). Not only did Appellants not
produce any evidence to dispute the loan documentation produced by Republic,
Appellants have failed, before both the circuit court and this Court, to articulate
“specific examples of what discovery could have been undertaken that would have
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affected the outcome had it been conducted.” Benton v. Boyd & Boyd, PLLC, 387
S.W.3d 341, 344 (Ky. App. 2012). Appellants merely argue for more time to
complete discovery in the broadest sense possible, and their argument must fail.
Finally, although Appellants repeatedly assert what they “thought” and “felt” at the
time they signed the loan documentation, “[a] party’s subjective beliefs about the
nature of the evidence is not the sort of affirmative proof required to avoid
summary judgment.” Haugh v. City of Louisville, 242 S.W.3d 683, 686 (Ky. App.
2007). We discern no error on the part of the circuit court.
Appellants next contend that the circuit court erred in granting
personal judgment against Jekel and Stone. They argue that a “review of the loan
documents in 2019 reveals that Appellant’s [sic] signed all documents in their
official capacity.”2 (Emphasis in original.) This argument is not supported by the
record before us. Both the business loan agreement and promissory note identify
the “Borrower” as Construction Fabrication and list the business address. The
business loan agreement also states, “Borrower is a limited liability company[.]”
The business loan agreement and the promissory note are signed by both Jekel and
Stone as members of Construction Fabrication.3 This is in contrast to the
2
See page 7 of Appellants’ brief.
3
The commercial security agreement identifies the “Grantor” as Construction Fabrication and
lists the business address of the company.
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commercial guaranties contained in the record. The guaranties first identify
“Borrower” as Construction Fabrication and, directly below, list either Jekel or
Stone as “Guarantor” along with their personal addresses, as opposed to the
address of the business. The guaranties have a definition section which provides,
in relevant part,
Borrower. The word “Borrower” means [Construction
Fabrication] and includes all co-signers and co-makers
signing the Note and all their successors and assigns.
Guarantor. The word “Guarantor” means everyone
signing this Guaranty, including without limitation [Jekel
and Stone], and in each case, any signer’s successors and
assigns.
Guaranty. The word “Guaranty” means this guaranty
from Guarantor to Lender.
Lender. The word “Lender” means [Republic], its
successors and assigns.
Note. The word “Note” means the promissory note dated
February 14, 2019, in the original principal amount of
$87,000.00 from Borrower to Lender, together with all
renewals of, extensions of, modifications of, refinancings
of, consolidations of, and substitutions for the promissory
note or agreement.
(Emphasis in original.)
Upon examination of the four corners of the guaranty documents, it is
apparent that Jekel and Stone guaranteed the February 14, 2019, loan from
Republic to Construction Fabrication in their individual capacities. We agree with
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the reasoning of the circuit court that it is “nonsensical that [Jekel and Stone]
would be guarantors of the loan solely in their executive capacities, as this would
essentially offer no additional guarantee to the collateral already signed to in the
loan.”4
For their third and final argument, Appellants assert the circuit court
erred in denying their motion to amend their answer. They again contend that the
issue is time-related because they did not have an opportunity to “flush out their
defenses.”5 The circuit court, in its discretion, denied Appellants’ motion to amend
finding that any allegation of fraud was a compulsory counterclaim that should
have been raised when the answer was filed. We agree with the circuit court.
Subject to exceptions contained therein that do not apply in the instant
action, CR6 13.01 states, in relevant part,
[a] pleading shall state as a counterclaim any claim
which at the time of serving the pleading the pleader has
against any opposing party, if it arises out of the
transaction or occurrence that is the subject matter of
the opposing party’s claim and does not require for its
adjudication the presence of third parties of whom the
court cannot acquire jurisdiction.
(Emphasis added.)
4
See page 10 of the circuit court’s opinion and order entered October 2, 2020.
5
See Appellant’s brief, page 9.
6
Kentucky Rules of Civil Procedure.
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Appellants allege fraud, in the broadest sense, on the part of Republic
at the time they signed the loan documentation. Any claim of fraud at the time the
loan documents were executed unquestionably arose “out of the transaction or
occurrence that is the subject matter of [Republic’s] claim” pursuant to CR 13.01
and, therefore, should have been included in Appellants’ initial answer filed in the
circuit court.
We also agree with the circuit court that, even if it allowed Appellants
to amend their answer, the allegations of fraud are futile due to the plain language
contained in the business loan agreement, promissory note, commercial security
agreement, and commercial guaranties. “A trial court may deny the right to amend
a pleading on the basis of the futility of the amendment itself, which essentially
equates to a failure to state a claim upon which relief could be granted.” Insight
Kentucky Partners II, L.P. v. Preferred Automotive Services, Inc., 514 S.W.3d 537,
555 (Ky. App. 2016) (internal quotation marks and citation omitted).
Accordingly, the circuit court did not abuse its discretion in denying
Appellants’ motion to amend.
IV. CONCLUSION
For the reasons stated above, we affirm the opinion and order of the
Jefferson Circuit Court.
ALL CONCUR.
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BRIEF FOR APPELLANTS: BRIEF FOR APPELLEE:
James W. Dunn Sarah S. Mattingly
Louisville, Kentucky Brian J. Wood
Louisville, Kentucky
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