On Premises Services, Inc. v. Stock Yards Bank & Trust Co.

RENDERED: NOVEMBER 6, 2020; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2019-CA-1292-MR
ON PREMISES SERVICES, INC.,
AND ALBERT H. GRUNEISEN, III APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE JUDITH E. MCDONALD-BURKMAN, JUDGE
ACTION NO. 16-CI-005564
STOCK YARDS BANK & TRUST CO. APPELLEE
OPINION
REVERSING AND REMANDING
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BEFORE: COMBS, DIXON, AND MAZE, JUDGES.
DIXON, JUDGE: On Premises Services, Inc. (“OPS”) and Albert H. Gruneisen,
III, appeal from the order granting summary judgment in favor of Stock Yards
Bank & Trust Co. (“SYB”) entered on June 11, 2019, and the order denying their
motion to alter, amend, or vacate same, entered on August 5, 2019, by the
Jefferson Circuit Court. Following a careful review of the briefs, record, and
applicable law, we reverse.
FACTS AND PROCEDURAL BACKGROUND
This case concerns the repayment of a commercial loan. On April 21,
2005, SYB lent OPS $141,015 for a term of five years, as documented by its
promissory note (“the Note”) of that date. This loan was guaranteed by Gruneisen,
documented in a commercial guaranty also entered on that date. OPS made most
of the payments on the loan but, after experiencing financial difficulty, eventually
stopped making payments. The last payment on the loan was made on January 19,
2010.
On March 5, 2010, Dennis Shaughnessy—on behalf of SYB—
emailed Gruneisen advising that he was three payments behind on the loan and
asking when payment would be made. Gruneisen replied the same day, “We are in
a bit of trouble at OPS . . . I don’t have a very good plan for making payments
today. I don’t know if I could even make interest payments.” Consequently, on
March 31, 2010, SYB charged off the principal ($43,615.34).
On April 2, 2010, Shaughnessy emailed Gruneisen again asking what
he was going to do about making payments. Gruneisen responded, “[B]usiness is
still in a pall . . . I bumped into David Heintzman the other evening coming out of a
meeting with a bankruptcy attorney.” Heintzman is Chairman of the Board and
Chief Executive Officer of SYB.
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More than eight months later, on December 10, 2010, Shaughnessy
emailed Gruneisen yet again to see if he could make any payments on the OPS
loan, stating, “I have been instructed by my Loan Committee to begin repossessing
all the collateral pledged on you[r] loan. Please let me know where you stand[.]”
Gruneisen replied, “[T]alked to Paul Palmer this morning and we are going to get
back together on January 1st. Repossessing collateral will only cause bankruptcies
and not amount to much for your efforts; in my opinion.” Palmer is a commercial
real estate relationship manager for SYB. No plan or promise to pay was made by
Gruneisen.
Nearly six years later, Gruneisen and Heintzman saw each other at a
restaurant, following which a renewed effort by SYB to collect repayment of the
OPS loan ensued. On August 25, 2016, Shaughnessy emailed Gruneisen stating, “I
have not been able to get approval for a reduced amount of your loan[.] Present
payoff is $82,687.07 and interest daily at $14.24[.] Please let me know how you
want to proceed with paying back the Bank[.]” Gruneisen responded, “Seems a
little harsh considering the amount of business I have sent to you guys, personally
and through the startups? At least forgive the interest as a finder[’]s fee? Who can
I talk to? David? Would have been nice if we were having this conversation 6
years ago.” Shaughnessy replied and asked Gruneisen to make him an offer to take
to the Committee. Gruneisen responded that he would “get one back to you
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tomorrow morning. I do not have the ability to [do] lump sum but maybe chunks.”
The following day Gruneisen emailed Shaughnessy stating:
While I am embarrassed to be having this discussion with
you; in my defense, I thought the OPS loan had been
written off back in the bad days. In fact, I think one of
your executives said as much to me back in 2012ish so I
did not address the outstanding balance that has now
almost doubled in 6 years. Once again, in my defense,
why did somebody not mention something sooner? Like
when I was dragging $3-4 Million worth of investor
funding into Stockyards from my startups (LiQ and Poly
Group)?
During those periods, I was making 2 salaries and I
would not have left a liability like your loan sitting
around to bite me in the backside. Today, the patents
have run out at OPS and its/my income is inconsequential
comparatively.
In summation:
1. I thought the loan had been written off
2. No one has mentioned it in 7 years
3. My actions, directions and friends have brought a lot
of business to Stockyards Bank
So I would ask your indulgence please.
One plan to consider:
1. Forgive the interest and penalties, if any, in
recognition of the amount of business I have sent your
way since 1980.
2. Allow me to pay off the balance to the tune of $4,000
per quarter starting October 1, 2016
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3. Make it a personal loan to me[.]
Later that day, Gruneisen asked Shaughnessy for a copy of the loan documents and
for the total principal amount. He informed Shaughnessy that he was “going to
have to look at financing the lump sum.” Instead, SYB filed the instant action
against OPS and Gruneisen on November 9, 2016.
Shortly after this action was filed, all parties moved the trial court for
summary judgment. On April 23, 2018, after a hearing on the matter, the trial
court granted SYB’s summary judgment on the issue of waiver, finding SYB had
not waived its claims because there was no written waiver. It denied the
countermotion for summary judgment, citing to genuine issues of material fact
regarding the collection efforts between 2010 and 2016, which would preclude
same. Nevertheless, in its order, the trial court remarked, “Laches may bar SYB
from recovering all, or at least part, of the six years of accumulated interest if the
delay was unreasonable.” The parties later renewed their motions for summary
judgment with SYB dropping its claim for interest and OPS asserting that the
statute of limitations and doctrine of laches bar SYB’s claims. The trial court
ultimately granted SYB’s motion for summary judgment, finding there was no
longer a genuine issue of material fact as to the applicability of laches. OPS and
Gruneisen moved the trial court to alter, amend, or vacate its order, but their
request was denied. This appeal followed.
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STANDARD OF REVIEW
Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, stipulations, 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.” CR1 56.03. An
appellate court’s role in reviewing a summary judgment is to determine whether
the trial court erred in finding no genuine issue of material fact exists and the
moving party was entitled to judgment as a matter of law. Scifres v. Kraft, 916
S.W.2d 779, 781 (Ky. App. 1996). A grant of summary judgment is reviewed de
novo because factual findings are not at issue. Pinkston v. Audubon Area Cmty.
Servs., Inc., 210 S.W.3d 188, 189 (Ky. App. 2006).
STATUTE OF LIMITATIONS
OPS and Gruneisen argue SYB’s claims are barred by the statute of
limitations found in KRS2 355.3-118, under Kentucky’s Uniform Commercial
Code (“UCC”). KRS 355.3-118(1) provides, “an action to enforce the obligation
of a party to pay a note payable at a definite time must be commenced within six
(6) years after the due date or dates stated in the note or, if a due date is
accelerated, within six (6) years after the accelerated due date.”
1
Kentucky Rules of Civil Procedure.
2
Kentucky Revised Statutes.
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OPS and Gruneisen claim the UCC applies to the Note because it is a
negotiable instrument. KRS 355.3-104 defines negotiable instruments under the
UCC:
(1) Except as provided in subsections (3) and (4) of this
section, “negotiable instrument” means an unconditional
promise or order to pay a fixed amount of money, with or
without interest or other charges described in the promise
or order, if it:
(a) Is payable to bearer or to order at the time it is
issued or first comes into possession of a holder;
(b) Is payable on demand or at a definite time; and
(c) Does not state any other undertaking or
instruction by the person promising or ordering
payment to do any act in addition to the payment
of money, but the promise or order may contain:
1. An undertaking or power to give,
maintain, or protect collateral to secure
payment;
2. An authorization or power to the holder
to confess judgment or realize on or dispose
of collateral; or
3. A waiver of the benefit of any law
intended for the advantage or protection of
an obligor.
It is undisputed that the Note was a promise to pay a fixed amount of money to
SYB with a definite due date of April 21, 2010.
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OPS and Gruneisen assert that their case is like Community Financial
Services Bank v. Stamper, 586 S.W.3d 737 (Ky. 2019), which held that “[a]s a
negotiable instrument, the promissory note is subject to the six-year statute of
limitations of KRS 355.3-118.” Id. at 744. In Stamper, the Court observed:
[T]he Bank filed suit to recover on the Note on January
25, 2016. If the cause of action accrued on the Note’s
stated due date of April 25, 2002, as the Bank argues, the
suit was untimely. If the cause of action accrued on
September 15, 2000, as Stamper argues, the suit was
untimely. Accordingly, we need not determine whether
the Bank’s August 2000 letter effectively accelerated the
due date of the Note, as this suit was barred by the
applicable statute of limitations.
Id. Here, since the due date of the Note was April 21, 2010, the six-year statute of
limitations was set to expire on or before April 21, 2016, unless an event
prolonging this period occurred prior to that date. This means that the suit herein
was untimely if the limitations period was not extended.3
SYB contends that Gruneisen extended the statute of limitations by
acknowledging the debt and promising to pay same. It is well-established:
A promise, made before a debt is barred, serves to
suspend the running of the statute or to prolong the
statutory limitation by cutting off the antecedent time,
and the action to recover must be brought on the original
obligation. If, however, the debt is barred at the time of
the new promise, it must be brought on the new promise.
3
Like Stamper, we need not determine whether the Note was accelerated.
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The promise to pay must be clear, absolute, and
unconditional, and proven to have been made within the
time prescribed by the statute.
An unqualified acknowledgment of a debt as a
subsisting demand is sufficient to prolong the statutory
limitation, and an express promise to pay it is
unnecessary.
The acknowledgment will operate to take the case
out of the statute when it admits the debt continues due at
the time of the acknowledgment. The debtor’s mere
admission of the justice of the debt is sufficient to
suspend, or take it out of, the statute of limitations.
City of Louisa v. Horton, 263 Ky. 739, 93 S.W.2d 620, 623 (1935) (citations
omitted). However, here, the only written communication by Gruneisen to SYB
within the applicable statute of limitations—between the date the Note was due
and six years thereafter—was his email dated December 10, 2010, in which
Gruneisen only stated that he “talked to Paul Palmer this morning and we are going
to get back together on January 1st” and “[r]epossessing collateral will only cause
bankruptcies and not amount to much for your efforts; in my opinion.” This
communication was neither a promise to pay the debt, an unqualified
acknowledgment of the debt, nor an admission of the justice of the debt. As such,
it did not serve to extend the statute of limitations.
Nevertheless, the trial court’s first order concerning the parties’
summary judgment motions may still be correct in that there may exist genuine
issues of material fact regarding the collection efforts between 2010 and 2016.
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Should SYB produce evidence of either an acknowledgment and/or promise to pay
the debt by Gruneisen, such might form a basis to extend the statute of limitations
thereby rendering the suit timely filed. Therefore, it was improper for the trial
court to grant summary judgment for SYB in its second order concerning the
parties’ renewed summary judgment motions.
LACHES
OPS and Gruneisen also contend the trial court erred in finding the
doctrine of laches to be inapplicable to the case herein simply because SYB
dropped its claim for interest. It is well-settled:
“Laches” in its general definition is laxness; an
unreasonable delay in asserting a right. In its legal
significance, it is not merely delay, but delay that results
in injury or works a disadvantage to the adverse party.
Thus there are two elements to be considered. As to what
is unreasonable delay is a question always dependent on
the facts in the particular case. Where the resulting harm
or disadvantage is great, a relative brief period of delay
may constitute a defense while a similar period under
other circumstances may not. What is the equity of the
case is the controlling question. Courts of chancery will
not become active except on the call of conscience, good
faith, and reasonable diligence. The doctrine of laches is,
in part, based on the injustice that might or will result
from the enforcement of a neglected right.
City of Paducah v. Gillispie, 273 Ky. 101, 115 S.W.2d 574, 575 (1938) (emphasis
added) (citations omitted). Laches is “a mixed question of law and fact[.]” Crady
v. Hubrich, 299 Ky. 461, 185 S.W.2d 949, 951 (1945).
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The trial court relied on SYB’s decision to no longer pursue interest
against OPS and Gruneisen in entering its final judgment. The court determined
that decision eliminated the factual issues about whether the delay was
unreasonable. However, there are still genuine issues of material fact pertaining to
whether SYB’s claims were barred by the statute of limitations that make the trial
court’s grant of summary judgment inappropriate. If SYB’s claims are barred by
the statute of limitations, the issue of whether the doctrine of laches applies is
moot.
CONCLUSION
Therefore, and for the foregoing reasons, the order entered by the
Jefferson Circuit Court is REVERSED, and the matter is remanded to the court for
further proceedings consistent with this Opinion.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE:
John Valentine W. Scott Stinnett
Louisville, Kentucky Louisville, Kentucky
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