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Banterra Bank v. Hendrick

United States District Court, W.D. Kentucky, Paducah Division

September 30, 2009

BANTERRA BANK PLAINTIFF
v.
PAUL HENDRICK DEFENDANT THOMAS L. OSBORNE DEFENDANT/THIRD PARTY PLAINTIFF
v.
WAYNE SHELTON, CPA THIRD PARTY DEFENDANT

          MEMORANDUM OPINION

          Thomas B. Russell Chief Judge, U.S. District Court

         This matter comes before the Court upon Third Party Defendant, Wayne Shelton, C.P.A.'s, Motion for Summary Judgment as to Osborne's counterclaims and Shelton's counterclaims against Osborne (Docket # 25). The Third Party Plaintiff, Thomas L. Osborne, has not responded. This matter is now ripe for adjudication. For the reasons that follow, the Third Party Defendant's Motion for Summary Judgment is GRANTED.

         BACKGROUND

         On or about November 17, 2007, Thomas Osborne, filed a civil action (“2007 Class Action”) against Wayne Shelton and others, on behalf of himself and others. Osborne alleged mismanagement of the American Justice School of Law (AJSL), and, among other things, alleged the commission by Shelton of numerous acts of fraud which allegedly damaged Osborne. A Settlement Agreement and Reciprocal Release (the “Agreement and Release”) was entered into on Feburary 15, 2008, by Osborne and Shelton, as well as others, with respect to the 2007 Class Action and all claims which were asserted, or could have been asserted, therein. On February 18, 2008, an order was entered from this Court that “all claims asserted or which could be asserted” in the 2007 Class Action were dismissed with prejudice.

         The Agreement and Release states that it represented a “FULL AND FINAL SETTLEMENT of any and all claims, debts, suits, actions and causes of action of whatsoever kind or nature, whether civil or administrative, or complaints with any administrative agency or private organization or professional association or licensing agencies, whether at law, in equity or mixed, whether matured, contingent or inchoate, and whether known or unknown, that any party, now has, has had or may hereafter have against any other party, their predecessors, affiliates, successors, assigns, officers, directors, shareholders, employees, agents, representatives, and insurers, in any way, manner or degree arising from or related to the subject matter of the civil actions, or the making of this agreement, or any other aspect whatsoever of the organization or operation of AJSL or its law school from the beginning of time through the effective date of this Agreement.” Additionally, in the second paragraph, “General and Complete Reciprocal Release, ” Osborne stated that he “forever and irrevocably dischare[d] and release[d] any and all claims, debts, suits, actions and causes of action of whatsoever kind or nature, whether at law, in equity or mixed, whether matured, contingent or inchoate, whether known or unknown that any party, now has, has had or may hereafter have against any other party, in any way, manner or degree arising from or relating to any act, omission, occurrence or transaction occurring in whole or in part prior to the date of this agreement.” The agreement lists the $296, 885.00 debt to Banterra Bank, the debt involved in the present action, as a debt to which Osborne would indemnify Shelton.

         This current action was filed by Banterra Bank against Osborne and Paul Hendrick on December 12, 2008, in McCraken County Circuit Court. It was removed to federal court based on diversity on January 20, 2009. This action concerns the October 26, 2006, line of credit loan for $300, 000.00. The loan was collateralized and there were two personal guaranty agreements executed by both Hendrick and Osborne. Osborne was serving on the Law School's Board of Directors at this time. The loan was fully secured by three lots of approximately ten acres each in Paducah's Information Age Park. At the time of the loan, the Law School reported to Banterra the lots were valued at $1, 455, 000.00. The Law School was unable to pay the note on the stated maturity date, and subsequently filed for Chapter 7 bankruptcy relief. Banterra then notified Hendrick and Osborne of the Law School's default and made demand for payment of the note. The note remains unpaid.

         Osborne filed a Third Party Complaint and Answer of the Defendant on February 25, 2009. Osborne alleges in his Third Party Complaint that Shelton is liable to Osborne for the debt to Banterra Bank because Shelton misrepresented information to Osborne which induced him to guaranty that debt personally. Shelton filed a Counterclaim with his Answer on April 20, 2009, alleging Osborne breached the Agreement and Release. Shelton moves for summary judgment as to Osborne's claims against him and his claims against Osborne for breach of the Agreement and Release. Shelton requests dismissal of the action, as well as attorneys fees and litigation costs.

         STANDARD

         Summary judgment is appropriate where “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         “[N]ot every issue of fact or conflicting inference presents a genuine issue of material fact.” Street v. J. C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989). The test is whether the party bearing the burden of proof has presented a jury question as to each element in the case. Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir. 1996). The nonmoving party must present more than a mere scintilla of evidence in support of his position; the nonmoving party must present evidence on which the trier of fact could reasonably find for the nonmoving party. See Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Mere speculation will not suffice to defeat a motion for summary judgment: “the mere existence of a colorable factual dispute will not defeat a properly supported motion for summary judgment. A genuine dispute between the parties on an issue of material fact must exist to render summary judgment inappropriate.” Moinette v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir. 1996).

         Finally, while Kentucky state law is applicable to this case pursuant to Erie Railroad v. Tompkins, 304 U.S. 64 (1938), a federal court in a diversity action applies the standards of Fed.R.Civ.P. 56, not “Kentucky's summary judgment standard as expressed in Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991).” Gafford v. Gen. Elec. Co., 997 F.2d 150, 165 (6th Cir. 1993).

         DISCUSSION

         Shelton has asserted that the claims of Osborne in the Third Party Complaint are barred by res judicata and the release affirmed in the Agreement and Release. Shelton also asserts that he is entitled to judgment as a matter of law as to his claims against Osborne arising from breach of the Agreement and Release.

         I. ...


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