Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

The Hurd Family Partnership, L.P. v. The Farmers Bank

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

December 19, 2016

THE HURD FAMILY PARTNERSHIP, L.P., Plaintiff,
v.
THE FARMERS BANK, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          David J. Hale, Judge United States District Court.

         Defendant Farmers Bank filed two motions for summary judgment, (Docket No. 59; D.N. 60) and the Court granted both motions. (D.N. 84) Plaintiff Hurd Family Partnership now moves the Court to alter or vacate its judgment pursuant to Rule 59(e). (D.N. 87) Because the plaintiff makes arguments that should have been raised earlier without alleging any errors of law or fact, presenting new evidence, introducing an intervening change in controlling law, or arguing that there will be manifest injustice, the Court will deny the plaintiff's motion to alter or vacate the Order.

         Additionally, because of the death of Defendant William Bennett Collett, Sr., the Partnership has filed an unopposed motion to substitute Defendant William Collett, Jr. in the place of his father. (D.N. 90) The Court will grant this motion.

         I. BACKGROUND

         Many of the facts are undisputed, and remain unchanged from the Court's Memorandum and Opinion issued on March 10, 2016. (D.N. 84) Therefore, the facts will not be repeated here, except for what is necessary for resolution of the instant motion. Plaintiff Hurd Family Partnership was a minority owner of Freedom Holding. (D.N. 59-1, PageID # 341) Defendants W. Bennett Collett, Sr. and W. Bennett Collett, Jr. owned the remainder of Freedom Holding's stock. (Id.) In early 2008, the Colletts asked King Southern Bank for a loan to be used to exercise stock options in Freedom Holding's subsidiary. (Id., PageID # 343) After negotiating with the Colletts, King Southern agreed to loan $1.3 million to Freedom Holding. (Id.) In February or March 2008, Jim King, president of King Southern, contacted Farmers to gauge its interest in buying the $1.3 million loan to Freedom Holding. (Id.) King was worried about a conflict of interest because, in addition to being the president of King Southern Bank, he also provided accounting services to Freedom Holding and its subsidiary as a Certified Public Accountant. (Id.) Instead of buying the loan outright, however, King Southern and Farmers agreed to the terms of a loan participation agreement: Farmers provided $650, 000 of the loan and its sister bank, Leitchfield Deposit Bank, provided the other $650, 000. (Id., PageID # 345)

         In March 2010, Jim King essentially asked Farmers to buy out the participation agreement with King Southern and make a new loan in the same principal amount directly to Freedom Holding. (Id., PageID # 349) Farmers agreed and completed a transaction in March 2010 that resulted in it becoming the lending bank from that point forward. (Id.) The loan became delinquent in February 2013, and the Partnership eventually filed the instant action claiming that Farmers had a duty to determine that the loans were properly used for Freedom Holding's corporate purposes. (Id., PageID # 350) It further alleged that the Freedom Holding's board of directors failed to approve the loan properly, and that King Southern and Farmers were aware of the ultra vires purpose behind the loan. (Id.)

         Farmers filed two motions for summary judgment. The first motion requested judgment against the Partnership on its claims that Farmers improperly loaned money to Freedom Holding in 2008. (Docket No. 59) The second motion requested judgment on Farmers' cross-claims against two of Farmers' co-defendants, W. Bennett Collett, Sr. and Freedom Holding. (D.N. 60) Collett, Sr. and Freedom Holding admitted that Farmers Bank was entitled to summary judgment and did not “dispute the amount sought.” (D.N. 63, PageID # 553)

         The Court granted both motions for summary judgment. (D.N. 84) The Court found that “Farmers was just a participant in the original loan, ” and thus did not owe any duty to the Partnership. (Id., PageID # 618) Specifically, the Court held that the participation agreement at issue met the Sixth Circuit's four-factor AutoStyle definition of a “true” participation agreement. (Id., PageID # 620) Therefore, “there was no relationship between Farmers and Freedom Holding, ” and Farmers did not owe Freedom Holding or the Partnership any duty. (Id., PageID # 622) The Court found that it was irrelevant that Farmers ultimately bought out its participation agreement in 2010 because “by then, the harms the Partnership complain[ed] of had already been done.” (Id.) Finally, the Court rejected the plaintiff's argument that Farmers was liable under Kentucky's ultra vires statute. (Id., PageID # 622-23) The Court held that it would be inequitable to apply this statute because “Farmers was not responsible for the underwriting on this loan; at the outset, it merely participated in the loan.” (Id., PageID # 623)

         In response to the Court's Memorandum Opinion and Order, the Hurd Family Partnership now moves the Court to alter or vacate its judgment pursuant to Rule 59(e). (D.N. 87) The Partnership argues that the judgment should be altered or vacated because (1) the Partnership should be considered a third-party beneficiary of the participation agreement, (2) Farmers did not simply buy out King Southern, they “ratified” the agreement, and thus were put “in the shoes of [King Southern] as of the date of the original loan, ” (3) the agreement does not meet the AutoStyle definition of a “true” participation agreement, and (4) the loan “fell within the doctrine of ultra vires” because “it was actually a loan for the benefit of the Colletts and others not even owners of Freedom Holding.” (See id.)

         Farmers responds that the Partnership has not established grounds for altering or vacating the judgment pursuant to Rule 59(e) because its first three arguments are new arguments that were previously unraised, and the fourth argument is “a rehashing of an old argument.” (D.N. 88, PageID # 645) Furthermore, Farmers contends that each argument fails as a matter of law. (See D.N. 88)

         The Partnership has also filed an unopposed motion to substitute Defendant William Bennett Collett, Jr. in the place of Defendant William Bennett Collett, Sr. due to the death of the elder Collett. (Docket No. 90)

         II. DISCUSSION

         A. Motion to Alter or Vacate Judgment

         Under Rule 59(e) “the court may grant a motion to alter or amend ‘if there is a clear error of law, newly discovered evidence, an intervening change in controlling law, or to prevent manifest injustice.'” Boling v. Prospect Funding Holdings, LLC, No. 1:14-CV-00081-GNS-HBB, 2016 WL 1611383, at *2 (W.D. Ky. Apr. 21, 2016) (citing GenCorp v. Am. Int'l, 178 F.3d 804, 834 (6th Cir. 1999) (citations omitted)). “The moving party bears ‘[t]he burden of demonstrating the existence of a manifest error of fact or law.'” Id. at *2 (citing Doe v. Patton, 381 F.Supp.2d 595, 605 (E.D. Ky. 2005), aff'd sub nom. Doe v. Magoffin Cty. Fiscal Court, 174 F. App'x 962 (6th Cir. 2006)). Notably, “the rule does not afford ‘defeated litigants a second chance to convince the court to rule in his or her favor by presenting new explanation, new legal theories, or proof.'” Ohio Midland, Inc. v. Proctor, No. 2:05-CV-1097, 2012 WL 580407, at *1 (S.D. Ohio Feb. 22, 2012) (citing Burnley v. Bosch Ams. Corp., 75 F. App'x 329, 333 (6th Cir. 2003)); see also Whitehead v. Bowen, 301 F. App'x 484, 489 (6th Cir. 2008) (“A motion under Rule 59(e) does not simply provide an opportunity to reargue a case.”); Ky. Petrol. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.