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Sparks v. Fifth Third Mortgage Co.

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

July 22, 2019

LUNDY L. SPARKS, Plaintiff,
v.
FIFTH THIRD MORTGAGE COMPANY, Defendant.

          OPINION AND ORDER

          KAREN K. CALDWELL, CHIEF JUDGE UNITED STATES DISTRICT COURT

         This matter is before the Court on the Plaintiff's Motion to Alter, Amend, or Vacate (DE 52), which seeks to vacate a judgment entered by this Court. (DE 52 at 1.) For the reasons stated below, the Motion (DE 52) is DENIED.

         I. BACKGROUND

         This case stems from a dispute over a residential construction loan. In 2006, Lundy Sparks contracted with B.A. Parker Custom Homes, LLC, (“Parker”) to build a residence. Contemporaneously, Sparks contracted with Fifth Third Bank (“Fifth Third”) to provide him with a $671, 920.00 construction loan for the property. (DE 1-1 at 4.) In the loan contract, Sparks authorized Fifth Third to disburse payments directly to Parker without Sparks first inspecting his new residence to ensure construction had progresses and the funds had been earned. (DE 1-1 at 5.) As the construction project continued, Parker failed to make or withheld payments to independent contractors, who filed liens against the property. Sparks settled those liens in state court to the tune of nearly $200, 000. (DE 1-1 at 6.)

         Sparks filed suit seeking damages from Fifth Third for its alleged breach of contract. (DE 1-1 at 7.) Sparks alleged that Fifth Third was contractually obligated to ensure that subcontractors had been paid prior to disbursing funds to Parker, and that Sparks should be compensated for his costs in resolving the liens. (DE 1-1 at 7-8.) Sparks also sought indemnification from Fifth Third in the amount that he paid to resolve the liens, plus attorney's fees and costs incurred. (DE 1-1 at 8-9.)

         Fifth Third filed a motion for judgement on the pleadings, asserting that the Complaint failed to state a claim for which relief can be granted. (DE 16 at 1.) Fifth Third argued that the plain language of the contract and Kentucky law precluded the relief sought by Sparks. (DE 16-1 at 1-2.) This Court agreed, issued an Opinion and Order granting Fifth Third's motion for judgment on the pleadings (“Opinion and Order”), dismissed the Complaint, and entered judgment in favor of Fifth Third. (See DE 50 and 51.)

         Sparks has now filed the present Motion to Alter, Amend, or Vacate the judgment under Fed.R.Civ.P. 59(e). (DE 52 at 1.) He asks this Court to vacate the judgment and allow the case to proceed. His Motion asserts the following: (1) that Fifth Third had a duty to pay off any liens filed by subcontractors and that the Court erred in not finding that the Loan Agreement required Fifth Third to hold back a retainage sufficient to pay off such liens; (2) that the Loan Agreement required Fifth Third to ensure that subcontractors had been paid and that no liens were placed on the property; (3) that the Court erred in finding that there was no fiduciary relationship between Sparks and Fifth Third; and (4) that the Court erred in not invalidating the Loan Agreement's indemnity provision because it amounts to an unconscionable exculpatory clause. (DE 52 at 1-2.) The Court considers Sparks' arguments below.

         II. ANALYSIS

         Sparks brings his Motion under Fed.R.Civ.P. 59(e), which addresses motions to alter or amend a judgment. (See DE 52 at 1.) Sparks does not address Fed.R.Civ.P. 60(b), which addresses grounds for relief from a final judgment, order, or proceeding. Sparks' Motion and Fifth Third's response clearly address the standard under Fed.R.Civ.P. 59(e) and not the standard under Fed.R.Civ.P. 60(b). Because motions to reconsider are generally evaluated under the same standards applicable to a civil motion to alter or amend a judgment under Fed.R.Civ.P. 59(e), the Court construes Sparks' Motion as a motion to reconsider. See United States v. Reynolds, No. 3:08-CR-143, 2018 WL 1950433, at *1 (E.D. Tenn. Apr. 24, 2018).

         Motions to reconsider are only granted if there was (1) a clear error of law; (2) newly discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice. Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir. 2005). A motion to reconsider “is not an opportunity to re-argue a case, ” and it “cannot be used to present new arguments that could have been raised prior to judgment.” Howard v. United States, 533 F.3d 472, 475 (6th Cir. 2008). When a motion to reconsider is based exclusively on legal arguments or evidence that could have been raised prior to the original entry of judgement, it should be denied. See Bingham v. Insight Commc'ns Midwest, LLC, No. CIV.A. 12-113-DLB, 2012 WL 5392635, at *1 (E.D. Ky. Nov. 5, 2012). Motions to reconsider “must either clearly establish a manifest error of law or must present newly discovered evidence.” Roger Miller Music, Inc. v. Sony/ATV Publ'g, LLC, 477 F.3d 383, 395 (6th Cir. 2007).

         Sparks does not explicitly clarify on which ground he bases his Motion, but he does state that the “Motion [was] filed to prevent manifest error by the Court.” (DE 56 at 1.) The Court assumes that Sparks' is arguing that the Court erred in applying the law.

         A “manifest error” is the “wholesale disregard, misapplication, or failure to recognize controlling precedent on the part of the court.” Dorger v. Allstate Ins. Co., No. CIV.A. 2:08-56-DCR, 2009 WL 2136268, at *2 (E.D. Ky. July 16, 2009) (citing Oto v. Metro. Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000)). The movant must establish that the Court's error was “so egregious that an appellate court could not affirm the judgment.” Id. at 2.

         A. Sparks' Motion argues-for the first time-that the Loan Agreement required Fifth Third to pay off liens filed by subcontractors and hold back a retainage sufficient to pay off all subcontractors' liens.

         Sparks' arguments that the Loan Agreement required Fifth Third to pay off all liens filed by subcontractors and hold back a retainage sufficient to pay off all subcontractors' liens are not procedurally proper under Fed.R.Civ.P. 59(e) because the arguments-which could have been raised-were not raised prior to the entry of judgment. In the present Motion, Sparks asserts that the Loan Agreement ¶ 3.B. (iii)(C) requires that “Fifth Third retain sufficient funds to pay off all mechanics' liens and other expenses related to the Project.” (DE 52 at 3.) Sparks further asserts that “such a mandate requires that the Bank know what the claims, charges, liens and encumbrances were, so that it would know to retain sufficient funds to pay them.” (DE 52 at 4.) These arguments are blatantly absent from the Complaint and all other pleadings filed by Sparks. In fact, Sparks' Complaint and response to Fifth Third's motion for judgment on the pleadings do not cite or otherwise reference ¶ 3.B. (iii)(C) of the Loan Agreement at all.

         Sparks' Complaint lists a breach of contract claim in which he states precisely how the contract was allegedly breached. The Complaint provides, in relevant part:

24. By allowing Mr. Sparks to choose an option on Exhibit A that did not require him to personally approve each draw request, Fifth Third contractually assumed the duty of doing everything that Mr. Sparks was required to do under the Agreement, including approving each draw request, and in so doing, ensure that the subcontractors who had performed work on the project had been paid, to avoid the filing of mechanics' or materialmen's liens on the property.
25. Kentucky law, both under the Uniform Commercial Code and under the common law, imputes a duty of good faith and fair dealing in every contract.
26. Fifth Third had a contractual duty to take all reasonable steps in fulfilling its obligations under the Agreement, including the obligation to ensure that subcontractors had been paid from the draws, so that these subcontractors would not be authorized to file liens against the property.
27. Fifth Third breached its contractual duty to ensure that the subcontractors had been paid, and failed to require lien releases, payment receipts, or other evidences that the subcontractors had been paid.
28. Mr. Sparks has been monetarily damaged by the breach of contract of Fifth Third, in that he has been required to pay attorneys' fees and costs to defend himself against mechanics' lien claims, and to settle certain claims by subcontractors asserting liens on the property.
29. This Court should enter a monetary judgment against Fifth Third, in favor or Mr. Sparks, for his compensatory damages caused by ...

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