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Sports South, LLC v. Johnson

United States District Court, E.D. Kentucky, Central Division, Lexington

February 27, 2014

EARLEY M. JOHNSON, II, et al., Defendants.


JOSEPH M. HOOD, Sr., District Judge.

This matter is before the Court upon the Joint Motion for Judgment on the Pleadings [D.E. 27] filed by Defendants Earley M. Johnson, II and Jennifer D. Arnett. Plaintiff filed a Response [D.E. 31], and Defendants filed a Reply. [D.E. 34]. This matter being fully briefed, and the Court being otherwise sufficiently advised, it is ripe for review.

I. Procedural Background

Security Safe Outlet, Inc. was a Kentucky corporation doing business in Paris, Kentucky. [D.E. 1 at 2; D.E. 10 at 1-2]. Security Safe applied for credit with Plaintiff Sports South, LLC [D.E. 32-10], and the application was approved. Sports South avers that it supplied Security Safe with hundreds of pieces of inventory between March 23, 2012 and December 14, 2012, and sent multiple invoices for the purchase price of the inventory. [D.E. 1 at 2]. According to Sports South, an amount equal to $279, 733.25 remains unpaid. [D.E. 1 at 3].

Shortly after Sports South began supplying inventory to Security Safe, Johnson, the President of Security Safe, and Arnett, the Vice-President of Security Safe, executed identical personal guaranties in favor of Sports South, guaranteeing the debts of Security Safe. Each guaranty provides:

In consideration of Sports South, LLC, at my request, giving or extending terms of credit to Security Safe Outlet, Inc.... hereinafter called debtor, I hereby give this continuing guaranty to said transferee or assigns, for the payment at full list price or any indebtedness, direct or contingent, of said debtor to said creditor, up to the amount four hundred thousand ($400, 000) DOLLARS, whether due or to be become due and whether now existing or hereafter arising; and I hereby bind and obligate myself, my heirs and assigns, in solido, with said debtor, for the payment of the said indebtedness precisely as if the same had been contracted and was due and owing by me in person, hereby agreeing to and binding myself, my heirs and assigns, by all the terms and conditions of sale or contained in any note or notes signed or to be signed by said debtor, making myself a party thereto; and, waiving all notice and pleas of discussion and division, I agree to pay upon demand at any time to said creditor, its transferees, assigns or successors, the full list amount of said indebtedness up to the amount of this guaranty, together with interest, finance and service charges as set forth hereinabove. The creditor may extend or modify any obligation of the debtor one or more times and may surrender any securities held by it without notice or consent from me, and I shall remain at all times bound hereby, notwithstanding such extensions and/or surrender.
It is hereby understood by the undersigned guarantor that should the total amount due hereunder remain unpaid by debtor and/or guarantor after the receipt by debtor and/or guarantor of 10 days written notice, then and in that event the undersigned guarantor hereby obligates himself to pay twenty-five (25%) percent of the total amount owed hereunder if this matter is placed in the hands of an attorney for collection.
This guaranty shall be a continuing guaranty, and shall remain in full force and effect until terminated by written notice upon mutual consent of both the creditor and debtor by either certified or registered mail to the said creditor, its transferees or assigns, but such termination shall not affect or impair any liability hereunder at the time of such termination....

[D.E. 1-2 at 2-3]. Sports South claims that it made a demand upon Defendants to pay the outstanding indebtedness incurred by Security Safe, in accordance with the above guaranty, but Defendants refused. [D.E. 1 at 3].

Subsequently, Sports South brought claims against Defendants for breach of contract. [D.E. 1 at 3-4]. Defendants now bring their joint motion for judgment on the pleadings claiming that the guaranties they executed are not enforceable under Kentucky law.

II. Standard of Review

"After the pleadings are closed[, ]... a party may move for judgment on the pleadings." Fed.R.Civ.P. 12(c). "For purposes of a motion for judgment on the pleadings, all well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment." JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581 (6th Cir. 2007) (quoting S. Ohio Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 479 F.2d 478, 480 (6th Cir. 1973)). "A Rule 12(c) motion is granted when no material issue of fact exists and the party making the motion is entitled to judgment as a matter of law." Id. at 582 (quoting Paskvan v. City of Cleveland Civil Serv. Comm'n, 946 F.2d 1233, 1235 (6th Cir. 1991)) (internal quotation marks omitted).

III. Analysis

The guaranties signed by Defendants do not comply with the requirements for a guaranty of indebtedness set out by Kentucky statute. Therefore, Defendants' Joint Motion ...

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