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Saalwaechter v. Carroll

Court of Appeals of Kentucky

April 7, 2017



          BRIEF FOR APPELLANT: Jasper Dudley Ward IV Louisville, Ky.

          BRIEF FOR APPELLEE: James P. Grohmann Joseph Charles Klausing Louisville, Ky.



          DIXON, JUDGE.

         Appellant, Bill Saalwaechter, appeals from an order of the Daviess Circuit Court granting Appellee, attorney Thomas Carroll's, motion for summary judgment and dismissing Saalwaechter's complaint alleging breach of contract, breach of fiduciary duties and professional negligence arising out the parties' attorney-client relationship. Finding no error, we affirm.

         This lawsuit arises from Carroll's representation of Saalwaechter in a transaction beginning in July 2007 involving a pawn shop business and surrounding real estate in Evansville, Indiana. The underlying facts surrounding the business transaction are complicated at best. The 7th Circuit Court of Appeals so noted in attempting to set forth the facts in Saalwaechter's appeal in a collateral case in that court.

The precise terms of the transaction were murky, however. Later, government regulators would have trouble understanding the deal, and some of the particulars remain unclear even on appeal.
As best we can tell, Saalwaechter expected that he would purchase the property and pawn business from the Dukes; lease everything back to a third party, Ryan McDaniel; and eventually, after giving McDaniel time to put together financing, sell to him at a small profit. While they put together financing, McDaniel and the former manager of Fares Loan, Jeremy Kamuf, would continue to operate the shop and make regular payments to Saalwaechter in exchange for the repurchase option. In essence, Saalwaechter would extend a short-term bridge loan to be paid back, with interest, within just a few months.
The plan hit a snag when Kamuf failed to make the required monthly payments. Saalwaechter investigated, only to find out that McDaniel did not know about the deal at all-what Saalwaechter had thought to be McDaniel's guarantee of the loan turned out to be a forgery. Saalwaechter evicted Kamuf from the premises but, without a functioning pawn shop on the property, worried that his real estate investment would quickly lose value.
Saalwaechter therefore decided his best course was to operate the pawn business himself. To his surprise, he discovered that he had never purchased the pawn business or its inventory, just the underlying real estate. It later became clear that Tom Carroll had purchased the Fares Loan assets himself. Carroll had also set up a new company, Evansville Pawn LLC, obtained a pawn license, and retained someone named John Jones to manage it (alongside Kamuf, it seems). Carroll showed Saalwaechter documents describing the deal and containing Saalwaechter's signature, but Saalwaechter claimed that he had never seen them before.
The plot further thickened when [the Indiana Department of financial Institutions "DFI"] received materials indicating that Carroll had procured the Evansville Pawn license on behalf of Kamuf, who was paying Carroll a monthly fee for the business (separate from the fee Kamuf was paying Saalwaechter for the real estate). Such "straw licensing" is prohibited under Indiana law. Ind. Code § 28-7-5-10.5. DFI refused to renew Evansville Pawn's license, and ordered Carroll to wind up his pawn business.
Saalwaechter then decided to create his own entity, Fares Pawn LLC. Just before Evansville Pawn's license was set to expire, Saalwaechter and Carroll agreed that Fares Pawn would take possession of Evansville Pawn's inventory and liquidate its outstanding pawns. Saalwaechter also applied for a pawn license for Fares Pawn. Until DFI approved the application, he planned to operate as a buy/sell business. Unlike a pawnbroker, a buy/sell business does not take the customer's property as collateral for a short-term loan, but instead buys the item outright. This sort of business does not require a license, but it is less lucrative than pawning.
Shortly after Saalwaechter submitted his license application, DFI informed him that, because he had no background in the pawn industry, he would need to find a store manager with two years' experience. Saalwaechter, who had expected to manage the store himself, reluctantly listed the only person he knew with that qualification: John Jones, the manager for Evansville Pawn.
. . . Months later, while running background checks for Saalwaechter's application, DFI learned that Jones had previously been convicted of a theft- and drug-related felony in Kentucky. . . . DFI also concluded that Jones had not been forthright with officials when they interviewed Jones and Carroll about Carroll's pawn license application in 2007. . . .
Based on this information, DFI told Saalwaechter that they would not give him a license so long as Jones worked at the pawn shop. Saalwaechter, who earlier had not wanted to hire Jones, now protested. He claimed that he had worked alongside Jones for several months and considered him a good employee. Saalwaechter later met with two members of the DFI ...

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