Bates v. Flemming
| Decision Date | 11 January 2022 |
| Docket Number | 19-1101-JWB |
| Court | U.S. District Court — District of Kansas |
| Parties | CRAIG A. BATES and KARLA R. BATES, Plaintiffs, v. GUY M. FLEMMING, KATHRYN MAKEKAU, and GUYCAT, LLC, Defendants. |
CRAIG A. BATES and KARLA R. BATES, Plaintiffs,
v.
GUY M. FLEMMING, KATHRYN MAKEKAU, and GUYCAT, LLC, Defendants.
No. 19-1101-JWB
United States District Court, D. Kansas
January 11, 2022
MEMORANDUM AND ORDER
JOHN W. BROOMES, UNITED STATES DISTRICT JUDGE
This case comes before the court on Plaintiffs' motion for partial summary judgment and memorandum in support and Plaintiffs' motion for default judgment and memorandum in support. (Docs. 80, 81, 92, 93.) No. responses have been filed and the time for doing so has now passed. Plaintiffs' motions are GRANTED IN PART AND DENIED IN PART for the reasons set forth herein.
I. Procedural History
Plaintiffs Craig Bates and Karla Bates (referred to throughout as “Plaintiffs”) initially filed this action against Guy Flemming and GuyCat, LLC, in April 2019 in state court and it was removed to this court.[1] (Docs. 1, 5.) This action involves a tragic fire that resulted in the loss of several lives and an insured property. Plaintiffs and Flemming entered into a contract for deed regarding the property, which was owned by GuyCat, a forfeited Kansas limited liability company.
After the fire, Flemming allegedly retained the insurance proceeds. Plaintiffs brought several claims against Flemming and GuyCat.
When the action was originally filed, both Flemming and GuyCat were represented by counsel and filed answers. (Docs. 30, 32, 33.) Counsel then moved to withdraw stating that the relationship had been terminated by Defendants. (Doc. 45.) The motion was granted by Magistrate Judge Gale. (Doc. 49.) According to the motion, defense counsel stated that the mailing address for both Flemming and GuyCat, LLC, was Flemming's home address in North Carolina. (Doc. 45 at 1.) Flemming then registered as a pro se participant on CMECF so that he could receive electronic notifications from this case. (See docket entry on March 11, 2020.) Flemming actively participated in the defense of this case until early 2021. On October 23, 2020, Plaintiffs filed a second amended complaint (the “SAC”). The SAC names Flemming, GuyCat, and Kathryn Makekau, Flemming's wife, as Defendants. (Doc. 71 at 1.) The SAC states that GuyCat is a Kansas limited liability company that was forfeited in 2007. It further alleges that process can be served on GuyCat by serving Flemming as GuyCat's agent and sole member. (Id. at 2.)
The docket sheet shows that summons was issued to Plaintiffs' attorney for service on Makekau. (Doc. 72.) As a pro se registered participant, Flemming received electronic notification of the SAC. On November 22, Flemming filed an answer on his own behalf. (Doc. 74.) Flemming has not retained counsel for GuyCat and no answer was filed on its behalf. A pretrial order was entered on February 18, 2021. (Doc. 79.) Plaintiffs, through counsel, and Flemming appeared at the pretrial conference. Plaintiffs then filed the motion for partial summary judgment as to all Defendants. (Doc. 80.)
Although Plaintiffs provided notice of the motion for summary judgment to Flemming, he has failed to respond to the motion. The court entered an order to show cause regarding the failure
to respond. (Doc. 83.) Flemming did not respond to the order. The court subsequently determined that Plaintiffs' service of the summons on Makekau was deficient and granted Plaintiffs' additional time to serve Makekau. (Doc. 86.) Plaintiffs then timely served Makekau and obtained a clerk's entry of default as Makekau failed to answer. (Doc. 91.) Based on the affidavit of Plaintiffs' attorney, Makekau has intentionally avoided being served with the SAC. (Doc. 87, Exh. 2.) Plaintiffs made multiple attempts to serve Makekau at her home address and were unsuccessful. Moreover, it was apparent that there was an individual in the home on at least one attempt. The court further finds that Makekau has had knowledge of this action and the fact that Plaintiffs added her as a Defendant because she has been involved in discovery in this case and Flemming objected to her being added as a party when Plaintiffs moved to amend. (Id., see also Doc. 68.)
Plaintiffs have now moved for default judgment against Makekau on all claims based on the allegations in the SAC. (Doc. 92.)
II. Facts
Plaintiffs are husband and wife. They reside in Pratt, Kansas. Flemming and Makekau reside in North Carolina. Prior to living in North Carolina, Flemming and Makekau resided in Pratt. (Doc. 81 at 2.) GuyCat, LLC, is a forfeited Kansas Limited Liability Company and Flemming was its only member. Flemming and/or GuyCat has owned twenty-two properties in Kansas. (Flemming Depo., Doc. 81-2 at 26:14-17; Doc. 81-11.)
In 2004, Flemming purchased real property located at 211 Austin in Pratt, Kansas (the “property”). (Doc. 79 at 3.) At that time, he was married to Makekau. Flemming took out a mortgage on the property with Armed Forces Bank NA (“AFB”). (Doc. 81-12.) On January 30, 2006, Flemming executed a general warranty deed transferring his interest in the property to GuyCat. (Doc. 81-11.) Based on the deed, Flemming transferred four other properties to GuyCat
on that same date. (Id.) Makakau was not listed on any of the deeds pertaining to the Pratt property and was not a party to the mortgage.
On April 15, 2011, Plaintiffs and Flemming entered into a seller-financed Agreement for Deed Contract (the “contract”) for the purchase of the property. (Doc. 81-10.) The contract identifies Flemming as the seller and Plaintiffs as the purchasers. At the time of the purchase, the mortgage with AFB remained on the property. This was reflected in the contract which was prepared by Flemming or someone at Flemming's request. Flemming could not recall who prepared the contract. Under its terms, the purchase price of the property was $60, 000. Plaintiffs received an initial credit of $5, 000 on the purchase price so that Plaintiffs could refinish the basement. (Id. at 1.) Plaintiffs were to place an initial deposit of $5, 500, leaving the balance due under the contract as $49, 500. The property was financed by Flemming and required monthly payments of $615.54 for a term of twenty years. (Docs. 81-10, 81-14.) The interest rate on the loan was fourteen percent per annum. (Doc. 81-10.) In addition to the monthly payment of principal and interest, Plaintiffs were required to pay monthly payments toward the maintenance of a fire insurance policy ($133.51) and property taxes ($87.17).[2] (Docs. 81-10, 81-14.) The total monthly payment under the contract was $836.22, which did not change. (Docs. 81-10, 81-4, 81-13.) Flemming was to hold the insurance and tax escrow payments in a separate account. There is no evidence of a separate account. The monthly escrow payment was never recalculated to correspond with the changes in taxes and insurance.
With respect to the insurance policy to be purchased, the contract stated as follows: “Seller shall maintain fire policy insurance on said real estate in an [sic] type approved by the current mortgage holder. Buyer should have own renters insurance to cover buyers [sic] own personal
property. Fire policy only covers dwelling.” (Doc. 81-10 at 1.) Flemming purchased insurance through USAA Casualty Insurance Company. Plaintiffs believed that the insurance policy was intended to protect their interests in the property. (Docs. 81-4, 81-5.) Craig Bates stated that Flemming led him to believe that Plaintiffs were named on the policy in some way. (Doc. 81-4 at 5.) Plaintiffs, however, were not named as beneficiaries on the insurance policy. Flemming never instructed Plaintiffs that they were required to purchase a separate policy to insure the property although Plaintiffs were aware that they needed a separate policy to protect their personal property. (Doc. 81-4 at 5.)
Plaintiffs were directed to make the loan payments in care of GuyCat at the First State Bank in Pratt (the “bank”). The deposits to the GuyCat account show that Flemming and Makekau used this account to pay for their personal expenses, such as entertainment, cosmetics, groceries, and veterinarian expenses. Flemming also deposited his own personal paychecks into the account.
At some time in 2012, a USAA representative inspected the property. During the inspection, she requested that Craig make repairs to the property and remove a trampoline. Craig made the requested repairs. In May 2012, Flemming failed to purchase fire insurance for the property and, as a result, AFB purchased insurance for the property from May 2012 until May 2014. (Docs. 81-19, 81-20.) This policy only covered the outstanding principal balance of the mortgage. Plaintiffs were not informed that Flemming had failed to maintain insurance on the property. In 2013, Flemming encouraged Plaintiffs to shop around for new insurance. Craig visited with several local agents; however, Flemming decided that the property would remain insured with USAA. (Docs. 81-4, 81-5.) In 2013, Plaintiffs were instructed to make the payments to the bank in care of Flemming after he had closed the GuyCat accounts. (Docs. 81-4 at 3, 81-16.) In May 2014, Flemming again purchased USAA insurance for the property.
On December 27, 2017, a fire destroyed a garage on the property. Following this loss, Craig and Flemming discussed how to spend the insurance proceeds. Craig had requested a prefabricated garage. (Doc. 81-4 at 5.) The record does not indicate what, if anything, was done regarding this claim.
On January 25, 2018, the property was completely destroyed by fire. The fire also resulted in the deaths of five members of Plaintiffs' family. At the time of the fire, Plaintiffs had made all of the required monthly payments on the property. On the day of the fire, Flemming made a claim with USAA. On February 6, 2018, USAA paid $256, 000 to Flemming, Makekau, and AFB. The total amount was the coverage limit on the policy. AFB retained $15, 355.40, which was the outstanding...
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