In re Montagne

• Citation: 425 B.R. 111
• Decision Date: 18 December 2009
• Docket Number: Adversary No. 08-1023.,Bankruptcy No. 08-10916.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court —District of Vermont
• Parties: In re Michael F. MONTAGNE, Debtor. Ag Venture Financial Services, Inc., Plaintiff, v. Michael F. Montagne, John Montagne, Diane Montagne, Montagne Heifers, Inc., Patenaude Grain, Ltd., Bourdeau Brothers, Inc., Defendants.

425 B.R. 111

In re Michael F. MONTAGNE, Debtor Ag Venture Financial Services, Inc., Plaintiff, v. Michael F. Montagne, John Montagne, Diane Montagne, Montagne Heifers, Inc., Patenaude Grain, Ltd., Bourdeau Brothers, Inc., Defendants.

Bankruptcy No. 08-10916. Adversary No. 08-1023.

United States Bankruptcy Court, D. Vermont.

December 18, 2009.

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Lisa Chalidze, Esq., Benson, VT, for Diane Montagne.

Gary L. Franklin, Esq., Douglas J. Wolinsky, Esq., Primmer Piper Eggleston & Cramer P.C., Burlington, VT, for Ag Venture Financial Services, Inc.

MEMORANDUM OF DECISION

COLLEEN A. BROWN, Bankruptcy Judge.

GRANTING SUMMARY JUDGMENT TO AG VENTURE FINANCIAL SERVICES, INC., DISMISSING EIGHT CAUSES OF ACTION IN DIANE MONTAGNE'S COUNTERCLAIM, AND DENYING DIANE MONTAGNE'S CROSS-MOTION FOR SUMMARY JUDGMENT

Ag Venture Financial Services, Inc. ("Ag Venture") filed an amended complaint (doc. # 30) in state court, in which two counts (conversion and fraudulent transfer) sought relief against Diane Montagne, wife of Debtor Michael Montagne. Mrs. Montagne responded by filing a counterclaim against Ag Venture that interposed eleven causes of action (the "Counterclaim") (doc. # 83). Subsequently, both parties filed cross-motions for summary judgment on the conversion and fraudulent transfer causes of action, and the causes of action in the Counterclaim. This decision addresses the motions for summary judgment with regard to the Counterclaim: for the reasons that follow, the Court denies Diane Montagne's motion, grants Ag Venture's motion, and dismisses eight of the eleven causes of action set out in the Counterclaim. The parties did not address the three remaining causes of action in the Counterclaim and therefore those claims remain.

PROCEDURAL HISTORY

On March 21, 2008, Ag Venture filed a thirteen-count amended complaint (doc. # 30) against Michael F. Montagne, John M. Montagne, Diane M. Montagne, Montagne Heifers, Inc. ("MHI"), Patenaude Grain, Ltd., and Bourdeau Brothers, Inc. ("BBI") in Vermont state court (# S60-08Fe). Counts X and XII (fraudulent conveyance and conversion, respectively) named Diane Montagne specifically. It appears from the record that Diane Montagne never filed an answer to the amended complaint in state court (although she did file an answer with affirmative defenses on January 14, 2008 in this Court (doc. # 145)). Mrs. Montagne filed the Counterclaim against Ag Venture (doc. # 83) and Ag Venture answered (doc. # 87). In October 2008, after Michael Montagne filed for bankruptcy relief under chapter 12, the lawsuit was removed to this Court. On April 17, 2009, Ag Venture moved for summary judgment on counts X and XII of its amended complaint and on Diane Montagne's Counterclaim (doc. # 250). Diane Montagne opposed the motion and filed a cross-motion for summary judgment (doc. # 272, refiled as doc. # 292); Ag Venture filed a reply (doc. # 278).

The Court granted Ag Venture's motion for summary judgment and denied Diane Montagne's cross-motion for summary judgment on the conversion of collateral cause of action (count XII) (doc. ## 328, 352) and denied both Ag Venture and Diane Montagne's cross-motions for summary judgment on the fraudulent transfer cause of action (count X) (doc. # 335). Consequently, the issue remaining to be adjudicated on the parties' cross-motions for summary judgment (doc. ## 250, 272/292) is the viability of Diane Montagne's Counterclaim against Ag Venture.

Mrs. Montagne set forth 79 paragraphs of allegations in the Counterclaim, followed by eleven paragraphs of claims for relief under the following theories: unclean hands (¶ 80); violation of express contractual provisions (¶ 81); breach of the contractual duty of good faith and fair dealing (¶ 82); negligence (¶ 83); negligent provision of pecuniary information (¶ 84); fraudulent inducement, fraud and/or negative deceit (¶ 85); control by a lender over its borrowers (¶ 86); interference with actual and/or prospective contractual arrangements (¶ 87); punitive damages (¶ 88); express and positive fraud (¶ 89); and indemnification (¶ 90). Each paragraph that alleges a claim begins "The conduct of Ag Venture as described above." As a matter of drafting, the Counterclaim fails to set forth which specific facts in the 79 paragraphs of allegations support each claim. The paragraphs setting forth claims for (1) violation of express contractual provisions, (2) breach of the contractual duty of good faith and fair dealing, (3) negligence, (4) negligent provision of pecuniary information, (5) fraudulent inducement, fraud and/or negative deceit, (6) control by a lender over its borrowers, and (7) interference with actual and/or prospective contractual arrangements all contain the statement that the conduct complained of "foreseeably and proximately damaged Defendant(s) herein including but not limited to lost profits, emotional distress and anxiety accompanied by significant physical symptoms including loss of sleep and stress, improper fees and costs, and attorneys' and bookkeeping fees in the instant matter and in collateral litigation" (id. ¶¶ 81, 82, 83, 84, 85, 86, 87).

FACTS

Based upon the extensive record in this case, and in the absence of a stipulation of undisputed material facts, the Court finds the following facts to be material and undisputed:

1. In October 2006, Diane Montagne separated from Michael Montagne (doc. ## 251, ¶ 8, 274 ¶ 8).

2. The separation agreement between Michael Montagne and Diane Montagne, dated December 2006 (the "Diane Montagne Agreement"), is a typed one page document that contains many hand-written interlineations. It describes a division of assets between Diane Montagne and Michael Montagne. Pursuant to this Agreement, Diane Montagne would receive both money and certain parcels of land from Michael Montagne (doc. # 328, Finding of Fact ¶ 5; ex. 8 to doc. # 251).

3. One of the typewritten provisions in the Diane Montagne Agreement indicated: "Ag Venture to refinance Mr. Montagne solely for all remaining farm debt, including open accounts and payables, with no exposure for Mrs. Montagne" (ex. 8 to doc. # 251). A handwritten notation near this provision stated that "All deals contingent on Diane being relieved of all debt described" with an arrow pointing to the provision that Ag Venture would refinance Mr. Montagne's remaining farm debt. The handwriting went on to say " & Ag Venture refinancing its existing debt, which it will use its best efforts to illegible."¹ Id. Thomas Bellavance, President of Ag Venture, Lisa Chalidze, attorney for Diane Montagne, and Michael Montagne signed the bottom of this page. They also put their initials near other handwritten additions and cross-outs. Id.

4. As part of the Diane Montagne Agreement, Mr. and Mrs. Montagne transferred certain parcels of real property between themselves. Mr. Montagne agreed to pay Diane Montagne $240,000 as partial consideration for the property his spouse conveyed to him (doc. # 251, ex. 1, p. 33; doc. # 274 ¶ 15).

5. On September 17, 2007, pursuant to the Diane Montagne Agreement, Ag Venture released Diane Montagne from liability for fifteen different notes and loan agreements that Mrs. Montagne had signed in favor of Ag Venture (the "Release") (doc. # 251, ex. 8). The Release provided that it was "strictly limited to the liability of Diane M. Montagne. It does not and shall not be construed or deemed as a release of any other obligor or guarantee by whomsoever owed." Id. Thomas Bellavance signed the release on behalf of Ag Venture (doc. # 293, Fact ¶ 6; Ex. 8 to doc. # 251).

6. Mrs. Montagne and her counsel were aware that Ag Venture had no ability to release her from any third party debts (doc. # 274 ¶ 14).

7. Ultimately, in a November 2007 letter to Ag Venture, Mr. Montagne decided that he did not want to pursue the refinancing indicated in the Diane Montagne Agreement (doc. # 251, ex. 12; doc. # 274 ¶¶ 25, 33).

SUMMARY JUDGMENT STANDARD

Summary judgment is proper if the record shows no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(C); Fed. R. Bankr.P. 7056. A genuine issue exists only when "the evidence is such that a reasonable trier of fact could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The substantive law identifies which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. See Anderson, 477 U.S. at 247, 106 S.Ct. 2505. Factual disputes that are irrelevant or unnecessary are not material. See id. The court must view all the evidence in the light most favorable to the nonmoving party and draw all inferences in the nonmovant's favor. See Cruden v. Bank of New York, 957 F.2d 961, 975 (2d. Cir.1992). In making its determination, the court's sole function is to determine whether there is any material dispute of fact that requires a trial. See Anderson, 477 U.S. at 249, 106 S.Ct. 2505; see also Palmieri v. Lynch, 392 F.3d 73, 82 (2d Cir.2004); Delaware & Hudson Ry. Co. v. Conrail, 902 F.2d 174, 178 (2d Cir.1990). But if the opposing party does not come forward with specific facts to establish an essential element of that party's claim on which it has the burden of proof at trial, the moving party is entitled to summary judgment. See Celotex, 477 U.S. at 323-24, 325, 106 S.Ct. 2548 ("One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses.... The burden on the moving party may be discharged by `showing'— that is, pointing out...