Bettis v. Hall

• Decision Date: 14 February 2012
• Docket Number: Case No. 10–cv–2457–JAR.
• Citation: 852 F.Supp.2d 1325
• Parties: Tony BETTIS, et al., Plaintiffs, v. Gary HALL, et al., Defendants.
• Court: U.S. District Court — District of Kansas

852 F.Supp.2d 1325

Tony BETTIS, et al., Plaintiffs,

v.Gary HALL, et al., Defendants.

Case No. 10–cv–2457–JAR.

United States District Court, D. Kansas.

Feb. 14, 2012.

Diane Hastings Lewis, G. Steven Ruprecht, Matthew M. Merrill, Stephen S. Brown, Brown & Ruprecht, PC, Kansas City, MO, for Plaintiffs.

William M. Modrcin, Johnston, Ballweg, Modrcin, Andrews & Tuley, L.C., Overland Park, KS, for Defendants.

MEMORANDUM AND ORDER

JULIE A. ROBINSON, District Judge.

Plaintiffs Tony Bettis, Eric Comeau, Steven Seat, and National Realty Capital, LLC (“NRC”) filed this action against Defendants Gary L. Hall, Bentley Investments of Nevada, LLC (“Bentley”), and the Gary L. Hall Revocable Trust (“Trust”) for breach of contract and quantum meruit. After the Court's ruling on Defendants' earlier dispositive motion, Plaintiffs' remaining claims allege breach of contract against Defendant Gary Hall and quantum meruit against Defendants Bentley and the Trust. Plaintiffs seek damages for unpaid profits that they claim are owed under the contract they entered into with Hall; Plaintiffs allege that these profits were instead paid to Bentley, Hall, and the Trust.

This matter is before the Court on Defendants' Motion for Partial Summary Judgment (Doc. 86) and Plaintiffs' Motion for Partial Summary Judgment on the Issue of Contract Interpretation (Doc. 88). As fully explained below, because the contract states that the full amount of overhead needed to be repaid before any profits were distributed, the Court denies Plaintiffs' motion for summary judgment. But because Plaintiffs may still be entitled to profits under the proper interpretation of the contract for a number of projects and Plaintiffs' evidence shows that Bentley received and retained a benefit from Plaintiffs, Defendants' motion is granted in part and denied in part.

I. Summary Judgment Standard

Summary judgment is appropriate if the moving party demonstrates that there is “no genuine dispute as to any material fact” and that it is “entitled to a judgment as a matter of law.” ¹ In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party.² A fact is “material” if, under the applicable substantive law, it is “essential to the proper disposition of the claim.” ³ An issue of fact is “genuine” if “there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way.” ⁴

The moving party initially must show the absence of a genuine issue of material fact and entitlement to judgment as a matter of law.⁵ In attempting to meet this standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim.⁶

Once the movant has met this initial burden, the burden shifts to the nonmoving party to “set forth specific facts showing that there is a genuine issue for trial.” ⁷ The nonmoving party may not simply rest upon its pleadings to satisfy its burden.⁸ Rather, the nonmoving party must “set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.” ⁹ To accomplish this, the facts “must be identified by reference to an affidavit, a deposition transcript, or a specific exhibit incorporated therein.” ¹⁰Rule 56(c)(4) provides that opposing affidavits must be made on personal knowledge and shall set forth such facts as would be admissible in evidence.¹¹ The non-moving party cannot avoid summary judgment by repeating conclusory opinions, allegations unsupported by specific facts, or speculation.¹² “ ‘Where, as here, the parties file cross motions for summary judgment, we are entitled to assume that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts.’ ” ¹³

Finally, summary judgment is not a “disfavored procedural shortcut”; on the contrary, it is an important procedure “designed to secure the just, speedy and inexpensive determination of every action.” ¹⁴ In responding to a motion for summary judgment, “a party cannot rest on ignorance of facts, on speculation, or on suspicion and may not escape summary judgment in the mere hope that something will turn up at trial.” ¹⁵

II. Uncontroverted Facts

District of Kansas Local Rule 56.1 outlines the proper procedures for stating the material facts and for addressing the other party's statement of material facts. When opposing a motion for summary judgment, a party must begin its memorandum in opposition “with a section containing a concise statement of material facts as to which the party contends genuine issues.” ¹⁶ The Rule continues, describing the proper format for the concise statement: “Each fact in dispute must be numbered by paragraph, refer with particularity to those portions of the record upon which the opposing party relies, and if applicable state the number of movant's fact that is disputed.” ¹⁷ Additionally, when a non-moving party adds material facts in the response brief, the moving party must respond to the additional material facts in the same manner—with a concise statement as to which additional facts the party contends genuine issues.¹⁸ Under Federal Rule of Civil Procedure 56(e), if a party fails to properly address another party's assertion of fact, the court may consider the fact undisputed for purposes of the motion. But still, in so doing, the court must be certain that no undisclosed factual dispute would undermine the uncontroverted facts.¹⁹

With the above rules of law and principles of application in mind, the following facts are stipulated to or uncontroverted.²⁰ In 2004, Defendant Hall was seeking real estate investment opportunities. Hall became acquainted with Plaintiffs Comeau, Bettis, and Seat when they approached him with a business plan to employ Hall's disposable capital by lending money secured by real estate as well as by investing in equity partnerships involving real estate. Hall had previously met Comeau because Comeau worked at a bank where Hall had done business. Hall decided to proceed with the investment plan that Plaintiffs proposed. Under the proposed investment plan, Comeau, Seat, and Bettis would locate real estate investment opportunities and present them to Hall. If Hall approved the project, he would provide funds to invest in the real estate project. In return for Plaintiffs work, Hall would compensate Plaintiffs by advancing them funds on a monthly basis to cover their overhead costs.

To memorialize the agreement, Comeau, Bettis, Seat, and Hall entered into a written contract, the Funding Agreement. In accordance with the Funding Agreement, Comeau, Bettis and Seat formed NRC to locate the real estate investments, including loans and equity participations, and Plaintiffs began to work for Hall full time. The Funding Agreement also required the formation of other limited liability companies, or Lending Entities, formed to serve as the lender and to hold any assets for each real estate investment project. In total, six individual Lending Entities—each owned 100% by Hall—were formed: Bentley Investments of Nevada, LLC (“Bentley”), Bentley Investments of Nevada II, LLC (“Bentley II”), Bentley Investments of Nevada III, LLC (“Bentley III”), Bentley Investments of Nevada IV, LLC (“Bentley IV”), Bentley Investments of Nevada V, LLC (“Bentley V”), and Bentley Investments of Nevada VI, LLC (“Bentley VI”). Hall formed Bentley for the purpose of providing funding and receiving payments for the real estate investment projects. Lending Entities Bentley II through Bentley VI simply held assets acquired in the course of the real estate investments. The Trust is the sole member of Bentley and the Bentley II through VI entities. Hall is the trustee of the Trust.

Proceeding under the Funding Agreement, in July of 2004, Hall began to advance Plaintiffs funds for “Overhead Costs,” which is defined in the Funding Agreement as salaries, health insurance expenses, travel expenses, phone and facsimile expenses of Comeau, Bettis, and Seat, as well as supplies and start-up expenses of NRC. In July 2004, Hall advanced Plaintiffs $40,000. On a monthly basis after that, through December of 2009, Hall advanced Plaintiffs $58,500 per month. In January and February 2009, Hall advanced Plaintiffs $41,500 per month. Hall then stopped advancing Plaintiffs funds for Overhead Costs. The Funding Agreement specified that the Overhead Costs were not considered a loan for which Comeau, Bettis and Seat were personally liable. Instead, the Overhead Costs were to be repaid from the cash revenues generated by the Lending Entities.

As Hall was performing this obligation under the Funding Agreement by advancing funds, Plaintiffs performed their obligation under the Funding Agreement by finding real estate investment opportunities. Hall invested in several real estate projects over a period of five years. Six of those projects—Terra Bentley I, Terra Bentley II, Stonewall Springs, Morley Bentley, Morley Cottonwood, and Morley FLP—have either failed to turn a profit or will not be profitable for many years and are thus not in dispute in this lawsuit. Other projects have generated cash revenues that were distributed under the Funding Agreement. Those projects are Weibel–RBND, Morley SWAT, Shorefox, Grand Elk, Morley Companies Family Development (“MCFD”), SWAT 15, and Porchlight. The parties dispute whether the final project, Grand Lodge, has generated cash revenues and profits that are distributable under the Funding Agreement.

Under the Funding Agreement, the cash revenues from these projects would be distributed by each Lending Entity in a certain order listed in sections 5(a)-(f) of the Funding Agreement:

(a)...