In re Kroh, Bankruptcy No. 87-00389-1-11
| Citation | 88 BR 972 |
| Decision Date | 17 June 1988 |
| Docket Number | 87-0185-1-11.,87-00388-1-11,Bankruptcy No. 87-00389-1-11,Adv. No. 87-0184-1-11 |
| Court | United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Western District of Missouri |
| Parties | In re John A. KROH, Jr., George P. Kroh, Debtors. KANSAS NATIONAL BANK & TRUST COMPANY, Plaintiff, v. John A. KROH, Jr., Defendant. KANSAS NATIONAL BANK & TRUST COMPANY, Plaintiff, v. George P. KROH, Defendant. |
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Benjamin F. Mann and Douglas J. Schmidt, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, Mo., for Kansas Nat. Bank & Trust Co.
F. Stannard Lentz, Mission, Kan., for John Kroh.
Ronald S. Weiss, Kansas City, Mo., for George Kroh.
ORDER GRANTING IN PART PLAINTIFF'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT AND FINDINGS OF FACT, CONCLUSIONS OF LAW AND JUDGMENT
Plaintiff Kansas National Bank & Trust Company seeks a determination that the debts of John A. Kroh and George P. Kroh are nondischargeable in bankruptcy pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (a)(2)(B). The Bank also seeks to hold John liable for George's debt and requests punitive damages against both brothers as well, plus a determination that such awards would also be nondischargeable under § 523(a)(6). Pursuant to the Bank's unopposed pretrial motion, the cases were consolidated for trial. The Bank's motion for partial summary judgment, ruled orally prior to trial, is also considered herein. Jurisdiction is predicated on 28 U.S.C. § 157(b)(2)(B), (I). In re Criswell, 44 B.R. 95, 971 (Bankr.E.D.Va.1984) (). This opinion, based on plaintiff's proposed findings and conclusions, constitutes findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052. To the extent findings of fact should be considered conclusions of law or vice versa, they shall be so construed.
Rule 56 F.R.C.P. applies in adversary proceedings. Bankr. Rule 7056. Summary judgment shall be entered when the factual presentation supporting the motion reveals no genuine issue of material fact and judgment may be entered as a matter of law. F.R.C.P. 56(c). The moving party has the initial burden of showing that no genuine issue as to any material fact exists. Adickes v. S.H. Kress and Company, 398 U.S. 144, 157, 90 S.Ct. 1598, 160812, 26 L.Ed.2d 142 (1970). Once that burden is met, the respondent has an affirmative duty "to set forth specific facts showing that there is a genuine issue for trial," and if the respondent fails to do so, "summary judgment, if appropriate, shall be entered against him." Rule 56(e). In lieu of entering summary judgment, the Court may determine those facts that are uncontroverted and those facts as to which trial will be necessary. Rule 56(d). Rule 56 does not mandate a hearing, and absent a request for a hearing none is required. Benson v. Matthews, 554 F.2d 860, 8621 (8th Cir.1977) (per curiam). Although neither party requested a hearing both parties were given an opportunity to be heard during a pretrial conference and prior to trial.
The first question is whether plaintiff met its burden of showing no genuine issue of material fact exists. Plaintiff's motion was accompanied by 23 exhibits which plaintiff intended to present at trial; portions of two deposition transcripts, including one of a witness plaintiff intended to call at trial; portions of a transcript from a previous trial on a similar complaint involving debtor and another plaintiff; and six affidavits in the form required by Rule 56(e), five of which are from persons plaintiff intended to call at trial.
Debtors filed briefs in response but did not file any affidavits or other admissible evidence controverting any of the facts set forth in plaintiff's motion. Nor did debtors request further discovery or opportunity to obtain affidavits or other evidence as allowed under Rule 56(f). Thus, although debtors attacked the sufficiency of the evidence, they did so without providing any affidavits, depositions or other appropriate submissions pursuant to Rule 56.
George's primary argument centered on assertion of his Fifth Amendment rights.1 He contends the assertion in his answer constituted a specific denial of each and every allegation therein. However, even when every allegation of a complaint has been denied, that alone is insufficient to meet respondent's burden of coming forward under Rule 56(e), which states:
When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party\'s pleading, but the adverse party\'s response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
Under facts similar to this case, the court in Chase Manhattan Bank v. Frenville, 67 B.R. 858 (Bankr.D.N.J.1986) granted a motion for summary judgment under § 523. Further, George did not submit an affidavit invoking the Fifth Amendment as to the motion for summary judgment but instead requested that his brief in this matter, signed only by counsel, be considered such an affidavit. Under both Frenville and Rule 56(e), George's assertion of his Fifth Amendment rights, alone, is insufficient to either controvert any of the facts set forth in plaintiff's motion or prevent this Court from entering summary judgment if appropriate.
John's primary argument is that issues of fact remain. John does not dispute plaintiff's evidence that he wrote a letter stating the loan proceeds would be used in connection with the commercial portion of the Hall Farm project. He also does not dispute that the loan proceeds were put into the brothers' company, Kroh Brothers Development Company ("KBDC"). However, he contends the financial statement was not materially false as of August 15 because Mondschein's deposition testimony supports a much higher figure for shareholder equity in KBDC at that time.
Additionally, debtors argue that nondischargeability under §§ 523(a)(2)(A) and (a)(2)(B) must be established by clear and convincing evidence, which allegedly has not been done; that some of the affidavits were self-serving and offered only conclusory opinions, particularly as to the issue of the Bank's reliance on the alleged misrepresentations and false financial statements; that there is insufficient evidence of an agency relationship between George and John or of John's intent to deceive; and that certain depositions would not be admissible at trial.
Although it is the Court's conclusion that the Bank was entitled to summary judgment, the issues of intent, materiality, agency, and the Bank's reliance were reserved for trial. Concerning the issues of credibility, with the exception of the affidavits of Catlett and Haseltine, the Court has either had the opportunity to hear the remaining affiants' testimony in other similar proceedings or has not been presented with any evidence controverting the facts stated in the affidavits. Catlett and Haseltine testified at trial so that the court could judge their credibility. Additionally, debtors consented to use of certain portions of relevant depositions at trial. For all these reasons, the Court finds that the Bank's factual submissions on summary judgment stand uncontroverted and therefore the evidence submitted in support of the motions is deemed admissible.
As to the standard of proof, it has recently been held in this district that "clear and convincing evidence" and "preponderence of the evidence" are actually varying terms for the same standard of proof under § 523. Henson v. Garner, 73 B.R. 26 (Bankr.W.D.Mo.1987), affirmed in unreported opinion, No. 87-0434-CV-W-1, (W.D. Mo. Feb. 29, 1988). In any event, assuming that "clear and convincing" evidence is a higher applicable standard, the Court finds the following facts have been shown by clear and convincing evidence in evidence presented for summary judgment. On October 20, John contacted Richard Catlett, president and chief executive officer of the Bank, to solicit personal loans of $250,000 each for himself and George. During his first conversation with John about the 1986 loans Catlett advised John the Bank could not loan him or George money if the money was going to be put into KBDC because the Bank had already loaned KBDC its legal limit. During this conversation John assured Catlett the loan proceeds would not be put into KBDC and that the loans were for personal investments in the Hall Farm Project. John also expressed an urgency in getting the loans, so on the basis of John's representations, Catlett orally presented the loan request to the Bank's Directors Discount Committee the morning of Tuesday, October 21.
The Committee approved the loans to John and George for the specific purpose of a personal investment in the Hall Farm Project if two conditions were met: first, that the Bank receive current financial statements adequate to support the loans from both John and George; and second, that the Bank receive written assurance that the loans were personal loans for investments in the Hall Farm Project.
Catlett then called John and advised him that before the Bank would make the loans it required current personal financial statements on him and George and a written assurance that the loans were for personal investments in the Hall Farm Project. During this second conversation Catlett told John, again, that the loan proceeds could not be put into KBDC and reminded him of previous problems with the bank examiners. John again assured Catlett the loan proceeds would not go into KBDC because the...
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