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Keybank, N.A. v. Hartmann

United States District Court, E.D. Kentucky, Southern Division, London

February 18, 2014

KEYBANK, N.A., Plaintiff,



This matter is before the Court upon the renewed Motion for Summary Judgment filed by Plaintiff, KeyBank, N.A. against Defendants Randall T. Hartmann and Evonne D. Hartmann. The Court previously denied summary judgment to KeyBank, but since that time, the parties have conducted further discovery, and KeyBank has refined its arguments in light of the Court's previous ruling. It is now apparent that no genuine factual dispute remains, and for the reasons set forth below, KeyBank's Motion for Summary Judgment is GRANTED.



Lake Cumberland Marine, LLC ("LCM"), was a retailer of and provider of related services for luxury boats. [R. 51-1 at ¶ 6.] Defendant Randall Hartmann was listed as LCM's managing member, while Defendant Evonne Hartmann was identified as the owner of all of LCM's stock. [R. 1-2 at 48.] Plaintiff Keybank is a national banking association that entered into certain financing agreements with LCM and with the Hartmanns, beginning in 2005. [R. 51-3 at 2-5.] As amended in 2006, KeyBank's agreement with LCM consisted of a demand floor plan that included a line of credit up to ten million dollars ($10, 000, 000), in exchange for granting KeyBank a security interest in an extensive array of LCM's business assets.[1] [ Id. at 3-4.] Randall and Evonne Hartmann each personally and unconditionally guaranteed all obligations of LCM to KeyBank. [R. 51-1 at ¶¶ 7-8, Ex. A & B.] KeyBank then perfected its security interests in LCM's assets by filing a Uniform Commercial Code ("UCC")-1 Financing Statement with the Kentucky Secretary of State. [R. 51-3 at 4; R. 51-1 at ¶11, Ex. D.]

LCM reportedly stopped making interest payments on its debt in September 2008, and failed to make any principal payments after June 2009. [R. 51-3 at 6.] In July 2009, LCM filed a voluntary bankruptcy petition. [ Id. ] KeyBank filed its proof of claim in the bankruptcy petition, establishing a secured claim for a debt totaling $2, 400, 711.14 owed to KeyBank. [ Id. at 6]. By a subsequent agreed order, KeyBank took possession of and liquidated LCM's inventory collateral in which it held a secured interest. [ Id. ] That collateral consisted of nine luxury yachts, two of which LCM sold "out of trust" before filing for bankruptcy and did not convey any of the sale proceeds to KeyBank. [ Id. at 7; R. 51-1, Exhs. H, K, M.] LCM sold one of the yachts shortly after filing for bankruptcy, and KeyBank recovered the proceeds from it. [R. 51-1, Exhs. H, Q.] KeyBank sold the six remaining yachts through third-party brokers, and recovered $1, 294, 250.00 in net sale proceeds, after deducting $145, 250.00 in broker's fees and costs. [ Id., Exhs. H, I, L, N-P.] After KeyBank disposed of LCM's assets that it controlled, a balance of $1, 261, 190.13 remained as an unsecured claim. [ Id. at ¶ 18, Ex. G.] After further negotiations, the parties agreed that LCM owed KeyBank $1, 104, 989.86 in outstanding debt. [ Id. at ¶ 19, Ex. H.] This agreed amount was approved by the Eastern District of Kentucky Bankruptcy Court, and an agreed order to that effect was filed on November 5, 2010. [ Id. ] Despite the agreement, KeyBank was unsuccessful in seeking payment for the deficient amount from the Hartmanns, pursuant to their personal guaranties. KeyBank alleges, and the Hartmanns do not deny, that since the time of the agreed order, the Hartmanns have not made any payments to KeyBank in their capacities as guarantors, and the interest on their debt has continued to accrue. [R. 51-1 at ¶¶ 36, 46-47.]

Consequently, KeyBank filed a claim in this Court for breach of contract in order to pursue the remaining amount from the Hartmanns based on their guaranties. In July 2012, KeyBank moved for summary judgment, which this Court denied. See Mem. Opinion & Order (March 27, 2013). [R. 38.] In denying summary judgment, the Court held that the agreed order in the bankruptcy proceeding had no preclusive effect in this lawsuit; that Ohio law governed the loan documents; that under Article 9 of the UCC, obligors cannot waive the defense of commercial reasonableness, which the Hartmanns had raised as an affirmative defense; and that there was a genuine issue of material fact concerning whether KeyBank had disposed of the collateral in a commercially reasonable manner. Id. Accordingly, the parties engaged in further discovery, particularly on the issue of commercial reasonableness, and the time for discovery has now expired.

In October 2013, KeyBank renewed its motion for summary judgment on slightly different grounds. [R. 51.] Neither Randall nor Evonne Hartmann have responded to KeyBank's motion for summary judgment, and the time in which to do so has long since expired. Under the Local Rules for the Eastern District of Kentucky, "[f]ailure to timely respond to a motion may be grounds for granting the motion." LR 7.1(c); see also Humphrey v. U.S. Attorney General's Office, 279 Fed.App'x 328, 331 (6th Cir. 2008) (recognizing that in certain instances a party's lack of response to a motion or argument may be grounds for the district court to assume that the non-moving party waives opposition and grant the motion). However, in cases involving motions for summary judgment, a lack of response to the motion does not lessen the burden of the moving party to demonstrate the absence of a genuine issue of material fact, nor does the lack of response lessen the burden of the Court "to examine the movant's motion... to ensure that he has discharged that burden." Carver v. Bunch, 946 F.2d 451, 454-55 (6th Cir. 1991).


Summary judgment is appropriate where "the pleadings, 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)(2); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). "A genuine dispute exists on a material fact, and thus summary judgment is improper, if the evidence shows that a reasonable jury could return a verdict for the nonmoving party.'" Olinger v. Corp. of the President of the Church, 521 F.Supp.2d 577, 582 (E.D. Ky. 2007) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). Stated otherwise, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson, 477 U.S. at 252.

The moving party has the initial burden of demonstrating the basis for its motion and identifying those parts of the record that establish the absence of a genuine issue of material fact. Chao v. Hall Holding Co., Inc., 285 F.3d 415, 424 (6th Cir. 2002). The movant may satisfy its burden by showing "that there is an absence of evidence to support the non-moving party's case." Celotex Corp., 477 U.S. at 325. Once the movant has satisfied this burden, the nonmoving party must go beyond the pleadings and come forward with specific facts to demonstrate there is a genuine issue of material fact in dispute. Hall Holding, 285 F.3d at 424 (citing Celotex Corp., 477 U.S. at 324). In applying the summary judgment standard, the Court must review the facts and draw all reasonable inferences in favor of the non-moving party. Logan v. Denny's, Inc., 259 F.3d 558, 566 (6th Cir. 2001) (citing Liberty Lobby, 477 U.S. at 255).

Here, the Hartmanns have not responded or otherwise opposed KeyBank's motion for summary judgment. Their lack of response is not necessarily grounds for the Court to automatically grant KeyBank summary judgment. Rather, in such a situation, "the court must review carefully those portions of the submitted evidence designated by the moving party." Guarino v. Brookfield Twp. Trustees, 980 F.2d 399, 410 (6th Cir. 1992). The Court, however, is not required to " sua sponte comb the record from the partisan perspective of an advocate for the non-moving party. Rather, in the reasoned exercise of its judgment the court may rely on the moving party's unrebutted recitation of the evidence... in reaching a conclusion that certain evidence and inferences from evidence demonstrate facts which are uncontroverted.'" Id. Once the Court determines that the moving party has met its burden, then the lack of response from the non-moving party becomes fatal to its case and the Court may enter judgment in favor of the movant. Id.


This action is in federal court on the basis of diversity jurisdiction because the Hartmanns are citizens of Kentucky, KeyBank is a citizen of Ohio, and the amount in controversy is clearly over $75, 000. 28 U.S.C. § 1332(a). This Court previously concluded that Ohio law governed the parties' agreement and would ...

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