In re Bates, Case No. 09-51279-NPO (Bankr.S.D.Miss. 5/27/2010), Case No. 09-51279-NPO.

Decision Date27 May 2010
Docket NumberAdv. Proc. No. 09-05092-NPO.,Case No. 09-51279-NPO.
PartiesIN RE: CHERYL R. BATES, Chapter 7 Debtor. HANCOCK BANK, Plaintiff, v. CHERYL R. BATES AND CHARLES R. BATES, A/K/A CHUCK BATES, D/B/A CHUCK BATES WHOLESALE, Defendants. CHERYL R. BATES, Counter-Plaintiff, v. HANCOCK BANK, Counter-Defendant. CHERYL R. BATES, Third-Party Plaintiff, v. CLAY LEYSER AND GERALD CALHOUN GEX, JR., AS AGENTS AND EMPLOYEES OF HANCOCK BANK, Third-Party Defendants.
CourtU.S. Bankruptcy Court — Southern District of Mississippi
MEMORANDUM OPINION ON RULE 7056 MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO CHERYL R. BATES, RULE 7056 MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO CHARLES R. BATES, AND

MOTION TO DISMISS COUNTERCLAIM AND THIRD-PARTY COMPLAINT

NEIL P. OLACK, Bankruptcy Judge

There came on for consideration the Rule 7056 Motion for Partial Summary Judgment as to Cheryl R. Bates ("Rule 7056 Motion Against Debtor") (Adv. Dkt. No. 23) filed by Hancock Bank the Rule 7056 Motion for Partial Summary Judgment as to Charles R. Bates ("Rule 7056 Motion Against Bates") (Adv. Dkt. No. 26) filed by Hancock Bank; and the Motion to Dismiss Counterclaim and Third-Party Complaint ("Motion to Dismiss") (Adv. Dkt. No. 21) filed by Hancock Bank, Clay Leyser ("Leyser") and Gerald Calhoun Gex, Jr. ("Gex") in the above-referenced adversary proceeding (the "Adversary"). Hancock Bank initiated this Adversary to recover the balance due on a promissory note bearing the forged signature of the Debtor, Cheryl R. Bates (the "Debtor"). Charles R. Bates ("Bates"), the Debtor's husband, forged her name on loan documents in order to obtain funds for his business. If granted, the Rule 7056 Motion Against Debtor and the Rule 7056 Motion Against Bates would result in a judgment in favor of Hancock Bank and against the Debtor and Bates in the amount of $16,152.24, not including interest and attorney's fees. The Motion to Dismiss, if granted, would result in the dismissal of all counterclaims alleged by the Debtor against Hancock Bank, Leyser, and Gex.

Other pleadings submitted by the parties in support of their respective positions include: (1) Itemization of Facts Relied Upon and Not Genuinely Disputed in Support of Rule 7056 Motion for Partial Summary Judgment as to Cheryl R. Bates (Adv. Dkt. No. 24) filed by Hancock Bank; Memorandum in Support of Hancock Bank's Rule 7056 Motion for Partial Summary Judgment as to Cheryl R. Bates (the "Brief in Support of Rule 7056 Motion Against Debtor") (Adv. Dkt. No. 25) filed by Hancock Bank; Defendant, Cheryl R. Bates' Response to Hancock Bank's Rule 7056 Motion for Partial Summary Judgment as to Cheryl R. Bates (Adv. Dkt. No. 38) filed by the Debtor; Defendant, Cheryl R. Bates' Response to Hancock Bank's Itemization of Facts Relied Upon and Not Genuinly [sic] Disputed in Support of Rule 7056 Motion for Partial Summary Judgment as to Cheryl R. Bates (Adv. Dkt. No. 39) filed by the Debtor; Defendant, Cheryl R. Bates' Itemization of Facts Relied Upon and Not Genuinly [sic] Disputed in Opposition to Rule 7056 Motion for Partial Summary Judgment as to Cheryl R. Bates (Adv. Dkt. No. 40) filed by the Debtor; Defendant, Cheryl R. Bates' Memorandum in Opposition to Hancock Bank's Rule 7056 Motion for Partial Summary Judgment as to Cheryl R. Bates (Adv. Dkt. No. 41) filed by the Debtor; (2) Itemization of Facts Relied Upon and Not Genuinely Disputed in Support of Rule 7056 Motion for Partial Summary Judgment as to Charles R. Bates (Adv. Dkt. No. 27) filed by Hancock Bank; Memorandum in Support of Hancock Bank's Rule 7056 Motion for Summary Judgment as to Charles R. Bates (the "Brief in Support of Rule 7056 Motion Against Bates") (Adv. Dkt. No. 28) filed by Hancock Bank; Response of Charles R. Bates to the Motion for Partial Summary Judgment of Hancock Bank (the "Bates Response to Rule 7056 Motion Against Bates") (Adv. Dkt. No. 36) filed by Bates; Response of Charles R. Bates to Itemizations of Factual Relief [sic] not Genuinely Disputed (Adv. Dkt. No. 37) filed by Bates; (3) Memorandum in Support of Motion to Dismiss Counterclaim and Third-Party Complaint (Adv. Dkt. No. 22) filed by Hancock Bank, Leyser, and Gex; Defendant, Cheryl R. Bates' Response to the Motion to Dismiss Counterclaim and Third-Party Complaint (Adv. Dkt. No. 34) filed by the Debtor; and Defendant Cheryl R. Bates' Memorandum in Opposition to the Motion to Dismiss Counterclaim and Third-Party Complaint (the "Debtor Brief in Opposition to Motion to Dismiss") (Adv. Dkt. No. 35) filed by the Debtor.

At the hearing held on March 4, 2010, Derek A. Henderson represented Hancock Bank, Leyser, and Gex; David L. Lord represented the Debtor; and Fredrick B. Feeney, II represented Bates. Having reviewed the above-referenced pleadings and all the exhibits attached thereto, together with other pleadings on file and the briefs submitted by the parties, the Court finds for the reasons set forth below that Hancock Bank is not entitled to summary judgment as a matter of law on its contract claim against the Debtor but is entitled to summary judgment as a matter of law on its conversion claim against Bates in an amount to be determined later at trial. The Court further finds that Hancock Bank, Gex, and Leyser are entitled to judgment as a matter of law on the Debtor's claims for (1) breach of fiduciary duty; (2) negligence per se based on violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq.; (3) negligent misrepresentation and fraud; and (4) civil conspiracy. Finally, the Court finds that Hancock Bank, Gex, and Leyser are not entitled to judgment as a matter of law on the Debtor's claims for negligence per se based on violations of the Gramm-Leach-Bliley Act ("GLBA"), 15 U.S.C. §§ 6801 et seq. or for conversion.1

Jurisdiction

This Court has jurisdiction over the subject matter of and the parties to this proceeding. This matter is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(B). Notice of the motions was proper under the circumstances.

Facts

In making its determination of facts on the Rule 7056 Motion Against Debtor and the Rule 7056 Motion against Bates, this Court must view the evidence submitted by the parties in the light most favorable to the non-moving party. McPherson v. Rankin, 736 F.2d 175, 178 (5th Cir. 1984). With that standard in mind, the Court finds that there are no genuine issues with respect to the following material facts:

1. In February or early March, 2007, Bates asked the Debtor to co-sign a loan for him, and she refused. (Debtor Exam. at 34-35, Adv. Dkt. No. 22).2

2. Sometime in early 2007, Bates contacted Hancock Bank requesting a $35,000 loan, purportedly on behalf of the Debtor. (Debtor Exam. at 24-25, Adv. Dkt. No. 22; Garcia Exam. at 9-10, Adv. Dkt. No. 40).

3. On March 6, 2007, Erin Garcia (formerly Erin Yarborough) ("Garcia"), an employee of Hancock Bank, completed a telephone application for a loan of money to Debtor in the amount of $35,000. (Garcia Exam. at 9-10 & Ex. 1, Adv. Dkt. No. 40).

4. Garcia did not meet with the Debtor or speak with her at any time during the loan process. (Garcia Exam. at 9-10, Adv. Dkt. No. 40). Leyser, the Western Division Manager at Hancock Bank and Garcia's immediate supervisor, provided Garcia with the information necessary to process the Debtor's telephone application. (Leyser Exam. at 7, Garcia Exam. at 8-9, Adv. Dkt. No. 40). Leyser and Bates have known each other for many years. (Leyser Exam. at 14, Adv. Dkt. No. 35).

5. On or about March 7, 2007, Gex, a loan review manager at Hancock Bank, observed Leyser and Bates talking together at Hancock Bank's branch in Bay St. Louis. (Gex Exam. at 7, 11, Adv. Dkt. No. 40). Gex had previously worked for Bates, and they were friends. (Gex. Exam. at 131-4, 16, Adv. Dkt. No. 40). Leyser asked Gex to deliver the promissory note and other loan documents personally to the Debtor at her home in Pass Christian. (Gex Exam. at 11, Adv. Dkt. No. 40). Gex delivered the note and other loan documents to the Debtor's home, but left them there with Bates instead of the Debtor.3 (Gex. Exam. at 11, 13, Adv. Dkt. No. 40).

6. On or about March 8, 2007, the Debtor purportedly executed a promissory note in which she agreed to pay Hancock Bank $35,055, together with interest at the rate of ten (10%) percent, in 36 installments of $1,131.48, beginning on April 8, 2007, with the final payment due on March 8, 2010. (Ex. 1, Adv. Dkt. No. 24).

7. No employee at Hancock Bank spoke with the Debtor about the loan or witnessed her sign the promissory note or any of the other loan documents. (Garcia Exam. at 9, Leyser Exam. at 34, Gex Exam. at 13, Adv. Dkt. No. 40; Debtor Exam. at 66-68, Adv. Dkt. No. 22). Hancock Bank's actions in this regard were not typical for the bank and violated its own banking standards. (Gex Exam. at 12-13, Adv. Dkt. No. 35).

8. Bates forged the Debtor's name on the promissory note. (Debtor Exam. at 24-25, Adv. Dkt. No. 24). The Debtor never authorized Bates to sign her name. (Debtor Exam. at 35-35, Adv. Dkt. No. 24). Bates admits in Bates Response to Rule 7056 Motion Against Bates that he, not the Debtor, owes the balance due on the loan. (Bates Resp. ¶ IX, Adv. Dkt. No. 36).

9. Bates executed a Consumer Security Agreement pledging as collateral for the loan two (2) motor vehicles: a 2003 Chevrolet Pickup and a 2004 Acura.4 (Ex. 2, Adv. Dkt. No. 24). The Debtor's signature also appears on the Consumer Security Agreement. (Ex. 2, Adv. Dkt. No. 24). The agreement prevented Bates from selling or otherwise disposing of the collateral without Hancock Bank's prior written consent until the loan was paid in full. (Ex. 2, Adv. Dkt. No. 24).

10. Hancock Bank perfected its security interest in the two vehicles, as evidenced by certificates of title issued by the State of Mississippi, which indicate that as of March 8, 2007 Hancock Bank was the first and only lienholder.5 (Ex. 3, Adv. Dkt. No. 24).

11. On or about March 8,...

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