Central Kansas Credit Union v. Mutual Guar. Corp., 93-4255-SAC.

CourtUnited States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
Citation886 F. Supp. 1529
Docket NumberNo. 93-4255-SAC.,93-4255-SAC.
Decision Date07 April 1995

886 F. Supp. 1529


No. 93-4255-SAC.

United States District Court, D. Kansas.

April 7, 1995.

886 F. Supp. 1530
886 F. Supp. 1531
886 F. Supp. 1532
Ron D. Beal, Klenda, Mitchell, Austerman & Zuercher, Wichita, KS, for plaintiff

James L. Grimes, Jr., Foulston & Siefkin, Topeka, KS, and Robert Kirk Walker, Strang, Fletcher, Carriger, Walker, Hodge & Smith, Chattanooga, TN, for defendant.


CROW, District Judge.

The case comes before the court on the defendant Mutual Guaranty Corporation's (MGC) motion for summary judgment (Dk. 65), on the plaintiff Central Kansas Credit Union's (CKCU) motion for summary judgment (Dk. 69), and on the defendant's objections to a magistrate judge's order (Dk. 104). The court first will consider MGC's motion regarding the settlement agreement and then will address the motions as a group regarding the return of the CKCU's capital contribution and special assessment. For the reasons stated below, the court grants the defendant's motion for summary judgment.


CKCU is a Kansas credit union with its principal offices in Hutchinson, Kansas. Prior to 1982, its deposits had been guaranteed by Secured Savings Credit Union of Wichita, Kansas ("SSCU"). In 1982, SSCU merged with MGC, which is a non-profit public corporation created by the Tennessee Legislature having as its purposes "to aid and assist any member credit union ..., in order that the shareholdings and insured accounts of any individual account holder of a member credit union shall be protected or guaranteed against loss," and to advance the general welfare of its member credit unions. (Dk. 70, Ex. A, MGC's Bylaws).

After the merger, CKCU, like other Kansas credit unions that had been insured with SSCU, entered into a contract of insurance with MGC that incorporated certain terms of SSCU's and MGC's 1982 Merger Agreement. In 1989, a dispute between the Kansas member credit unions and MGC emerged over the credit unions' liability under the merger agreement for a pro rata share of all losses and expenses incurred by MGC with the rehabilitation, merger, liquidation and satisfaction of indemnity obligations of certain credit unions. CKCU settled this dispute in 1990 and paid MGC $266,818.48 in exchange for a full release. CKCU withdrew its membership from MGC in 1992, and MGC pursuant to its bylaws retained CKCU's capital contribution and special assessment.

The plaintiff CKCU brought this action seeking to recover the $266,818.48 settlement it paid MGC and the capital contribution and special assessment it lost upon withdrawing from MGC. The court believes it can resolve the case upon deciding two issues: (1) Are CKCU's claims regarding its liability under the 1982 Merger Agreement barred by reason of its subsequent settlement agreement with MGC?, and (2) Does MGC have a valid and enforceable bylaws provision allowing it to retain one-hundred percent of a credit union member's contributions and assessments upon withdrawal?


A court grants a motion for summary judgment under Rule 56 of the Federal

886 F. Supp. 1533
Rules of Civil Procedure if a genuine issue of material fact does not exist and if the movant is entitled to judgment as a matter of law. The court is to determine "whether there is the need for a trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The substantive law governing the suit dictates which facts are material or not. Id. at 248, 106 S.Ct. at 2510. "Only disputes over facts that might affect the outcome of the suit under the governing law will ... preclude summary judgment." Id. There are no genuine issues for trial if the record taken as a whole would not persuade a rational trier of fact to find for the nonmoving party. Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). "There are cases where the evidence is so weak that the case does not raise a genuine issue of fact." Burnette v. Dow Chemical Co., 849 F.2d 1269, 1273 (10th Cir.1988)

The initial burden is with the movant to "point to those portions of the record that demonstrate an absence of a genuine issue of material fact given the relevant substantive law." Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 635, 121 L.Ed.2d 566 (1992). If this burden is met, the non-moving party must "come forward with specific facts showing that there is a genuine issue for trial as to elements essential to the non-moving party's case." Martin v. Nannie and Newborns, Inc., 3 F.3d 1410, 1414 (10th Cir.1993) (citations omitted). The court views the evidence and draws any possible inferences in the light most favorable to the non-moving party. MacDonald v. Eastern Wyoming Mental Health Center, 941 F.2d 1115, 1117 (10th Cir.1991).

More than a "disfavored procedural shortcut," summary judgment is an important procedure "designed `to secure the just, speedy and inexpensive determination of every action.' Fed.R.Civ.P. 1." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). At the same time, a summary judgment motion does not empower a court to act as the jury and determine witness credibility, weigh the evidence, or choose between competing inferences. Windon Third Oil and Gas v. Federal Deposit Ins., 805 F.2d 342, 346 (10th Cir.1986), cert. denied, 480 U.S. 947, 107 S.Ct. 1605, 94 L.Ed.2d 791 (1987).


For purposes of this motion, the court considers the following facts to be uncontroverted.

1. The plaintiff, CKCU, is a credit union organized under Kansas law with its principal office in Hutchinson, Kansas. The defendant, MGC, is a non-profit membership public corporation created in 1974 by the Tennessee legislature.

2. Kansas law requires credit unions to insure the shares of its depositors. SSCU was organized and operated under Kansas law for the primary purpose of insuring the shares of member credit unions. Prior to March 30, 1982, CKCU had its deposits insured by SSCU.

3. On March 30, 1982, State Credit Union Share Insurance Corporation, now known as MGC, and SSCU entered into an agreement, whereby MGC agreed to purchase the assets and assume the liabilities of SSCU as of the date of closing. ("1982 Agreement").

4. Prior to March 30, 1982, several Kansas credit unions insured by SSCU had financial problems that had caused sizeable losses and expenses for SSCU. These credit unions were Hesston, Lawrence Government Services, Capital City, Community Mercantile, Haskell County, Stockton, Tri-State and Phillips Refinery ("financially distressed credit unions").

5. On April 29, 1982, CKCU became a member of MGC upon entering into a contract of insurance with MGC. Under that contract, the parties agreed, inter alia, that Tennessee law would govern the contract, that CKCU would comply with MGC's bylaws, that certain terms of the 1982 Agreement would be incorporated by reference,

886 F. Supp. 1534
and that CKCU would be bound by the terms and conditions of the 1982 Agreement

6. The 1982 Agreement created a special reserve fund to offset losses and expenses incurred with respect to the financially distressed credit unions. It was initially funded by SSCU's net worth. The 1982 Agreement further provided that in the event the special reserve proved insufficient to cover those losses and expenses, MGC would advance the necessary funds and then would be repaid by former members of SSCU who had become members of MGC.

7. In February of 1989, MGC submitted to CKCU a request for payment of CKCU's pro rata share of advances made by MGC pursuant to the special reserve provisions of the 1982 Agreement. MGC sent the same letter to other Kansas credit union members who had agreed to be bound to the 1982 Agreement.

8. A dispute arose between some of the Kansas credit unions and MGC over the amount of the credit unions' liability under the 1982 Agreement. In April of 1989, a number of the Kansas credit unions filed a lawsuit entitled Telephone Employees Credit Union et al. v. Mutual Guaranty Corporation, No. 89-CV-871 (Third Judicial District, Shawnee County, Kansas) ("Telephone lawsuit"). CKCU was aware of the Telephone lawsuit but chose not to join it.

9. Pursuant to MGC's notice sent in February of 1989, CKCU paid twenty percent of its pro rata share or $34,087.28 by check dated April 21, 1989.

10. CKCU also had a dispute with MGC over the amount of its liability to MGC under the 1982 Agreement.1 CKCU's Board of Directors authorized CKCU's president, Ron Ogle, to negotiate a settlement of this dispute.

11. By letter dated August 2, 1989, MGC proposed a settlement of CKCU's liability under the 1982 Agreement for $333,523.10, representing CKCU's pro rata share of the combined settlement offer of $3,750,000. In response, Ron Ogle sent MGC a letter dated August 22, 1989, that counteroffered a combined settlement of $1,970,018. Attached to Ogle's letter were certain terms and conditions to the counteroffer. MGC rejected this counteroffer.

12. In October of 1989, the Kansas Credit Union League ("KCUL"), of which CKCU was a member at the time, proposed a combined settlement offer of $2,500,000. The minutes from CKCU's board meeting indicated its officers had signed a letter of intent in support of that settlement offer. The letter of intent included the following:

The undersigned credit union agrees to the following general provisions:
3. That this settlement offer will be a full and final settlement for all liabilities resulting from the 1982

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