In re Montagne, Case No. 08-10916 (Bankr.Vt. 5/10/2010)
| Decision Date | 10 May 2010 |
| Docket Number | Case No. 08-10916.,Adversary Proceeding No. 08-1023. |
| Court | U.S. Bankruptcy Court — District of Vermont |
| Parties | In re: Michael F. Montagne, Chapter 12, Debtor. Ag Venture Financial Services, Inc., Plaintiff, v. Michael F. Montagne, et al. Defendants. |
Gary L. Franklin, Esq., Douglas J. Wolinsky, Esq., Primmer Piper Eggleston & Cramer PC, Burlington, VT, For Ag Venture Financial Services, Inc.
GRANTING SUMMARY JUDGMENT TO AG VENTURE FINANCIAL SERVICES, INC. AS TO REMAINING COUNTERCLAIMS OF DIANE MONTAGNE
Ag Venture Financial Services, Inc. ("Ag Venture") filed an amended complaint (doc. # 30) in state court, in which two counts, one for fraudulent conveyance (Count X) and one for conversion (Count XII) sought relief against Diane Montagne. Mrs. Montagne responded by filing a counterclaim interposing eleven causes of action against Ag Venture (doc. # 83), and the action was subsequently removed to this Court. 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. On November 17, 2009, this Court entered a decision granting Ag Venture summary judgment on its cause of action for conversion (Count XII) against Diane Montagne (doc. # 352). On December 18, 2009, this Court entered a decision granting Ag Venture's motion for summary judgment, and denying Diane Montagne's motion for summary judgment, on eight of the eleven causes of action set out in the counterclaim (doc. # 371). The parties did not address the three remaining counterclaims for unclean hands, indemnification, and punitive damages.
On January 26, 2010, Ag Venture filed a motion for summary judgment on those remaining three counterclaims (doc. # 383), and withdrew its only outstanding cause of action (for fraudulent conveyance (Count X)) against Diane Montagne (doc. # 383-1, pp. 4-5). In her opposition to Ag Venture's instant motion for summary judgment (doc. # 398), Diane Montagne withdrew her counterclaim for unclean hands (doc. # 398, p. 1), thus leaving for adjudication counterclaims seeking indemnification and punitive damages. For the reasons set forth below, the Court grants Ag Venture's motion for summary judgment as to both of Diane Montagne's remaining counterclaims.
This Court has jurisdiction over this adversary proceeding and Ag Venture's motion for summary judgment under 28 U.S.C. §§ 1334, 157(b)(2)(B) and (C), and the parties' stipulation to this Court's entry of a final judgment on the causes of action relating to this Title 11 case. See doc. # 144, pp. 2-3. As Diane Montagne asserts only state law causes of action and defenses in her remaining counterclaims, state law must guide this Court's analysis and determination of the issues. See Butner v. United States, 440 U.S. 48, 54 (1979).
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 undisputed:
1. On December 31, 1998, Michael and Diane Montagne executed and delivered to Ag Venture a promissory note in the original principal amount of $580,000. The promissory note was secured by a commercial mortgage dated December 31, 1998, and recorded in the St. Albans Town Land Records on January 13, 1999 (doc. # 30, ¶ 9; doc. # 145, ¶ 9).
2. On June 16, 2005, Michael and Diane Montagne executed a line of credit promissory note in the original principal amount of $100,000 (doc. # 30, ¶ 15; doc. # 145, ¶ 15).
3. On November 18, 2005, Montagne Heifers, Inc. ("MHI") executed a promissory note in the original principal amount of $457,000 (doc. # 30, ¶ 18; doc. # 145, ¶ 18).
4. On or about September 17, 2007, at the request of Michael and Diane Montagne, Ag Venture executed and delivered to Diane Montagne a release, releasing Diane Montagne from all her obligations pursuant to the promissory notes, a security agreement, and a guaranty (doc. # 30, ¶ 20; doc. # 145, ¶ 20).
5. Michael Montagne, in his capacity as the president of MHI, distributed a payment of $240,000 to Diane Montagne. It was not distributed to Ag Venture or held by MHI for its creditors (doc. # 30, ¶ 23; doc. # 145, ¶ 23).
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)(2); 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 (1986); see also Celotex Corp. v. Catrett, 477 U.S. 317 (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 248. 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; see also Palmieri v. Lynch, 392 F.3d 73, 82 (2d Cir. 2004); Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 902 F.2d 174, 177-78 (2d Cir. 1990). 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 323-25 (); see also State v. G.S. Blodgett Co., 163 Vt. 175, 180, 656 A.2d 984, 988 (Vt. 1995).
Ag Venture's motion for summary judgment focuses on the alleged absence of evidence to support Diane Montagne's remaining counterclaims. Therefore, the Court focuses its decision on that basis for summary judgment, rather than the more typical question of whether there is a material dispute of fact that requires a trial. See Celotex, 477 U.S. at 325.
The gravamen of Ag Venture's motion with respect to indemnification is that Diane Montagne's counterclaim fails as a matter of law because there is no evidence (i) that Diane Montagne is being held to pay debts because of any legal obligation to answer for the actions of Ag Venture or (ii) that Diane Montagne and Ag Venture are joint tortfeasors (doc. # 383, p. 4; doc. # 418, pp. 2-3). See Celotex, 477 U.S. at 325.
The right to indemnity "is a long recognized exception to the common law rule precluding contribution among or between joint tortfeasors . . . and recognizes a right of indemnity even though two parties may each be equally liable to a third, if (a) there is an express agreement or undertaking by one to indemnify the other, or (b) the circumstances are such that the law will imply such an undertaking." Bardwell Motor Inns, Inc. v. Accavallo, 135 Vt. 571, 572, 381 A.2d 1061, 1062 (Vt. 1977); see also Knisely v. Central Vermont Hosp., 171 Vt. 644, 646, 769 A.2d 5, 8 (Vt. 2000). "Indemnification accrues `to a party who, without active fault, has been compelled by some legal obligation, such as a finding of vicarious liability, to pay damages occasioned by the negligence of another.'" Knisely v. Central Vermont Hosp., 171 Vt. at 646, 769 A.2d at 8 (quoting Morris v. Amer. Motors Corp., 142 Vt. 566, 576, 459 A.2d 968, 974 (Vt. 1982)). "The relationship of the parties must be `such that the obligations of the alleged indemnitor extend not only to the injured person, but also to the indemnitee." Loli of Vermont, Inc. v. Stefandl, 968 F.Supp. 158, 161 (D. Vt. 1997) (quoting Hiltz v. John Deere Indus. Equip. Co., 146 Vt. 12, 14-15, 497 A.2d 748 (Vt. 1985)).
Vermont does recognize a theory of implied indemnification, but it is very limited in scope. "Implied indemnity should be imputed `only when equitable considerations concerning the nature of the parties' obligations to one another or the significant difference in the kind or quality of their conduct demonstrate that it is fair to shift the entire loss occasioned by the injury from one party to another.'" Knisely v. Central Vermont Hosp., 171 Vt. at 646, 769 A.2d at 8 (quoting White v. Quechee Lakes Landowners' Ass'n, 170 Vt. 25, 29, 742 A.2d 734, 737 (Vt. 1999). "Implied indemnification is usually appropriate only when the indemnitee is vicariously or secondarily liable to a third person because of some legal relationship with that person or because of the indemnitee's failure to discover a dangerous condition caused by the act of the indemnitor, who is primarily responsible for the condition." Id. (quotation and citations omitted). There are Loli of Vermont, Inc. v. Stefandl, 968 F.Supp. at 162.
Diane Montagne's counterclaim for indemnification alleges that Ag Venture is obligated to indemnify her against "any and all costs, fees, liability, judgment, award, settlement or other detriment she incurs by virtue of the suit" brought by Bourdeau Brothers, Inc. ("BBI") against her (doc. # 83, ¶ 90).1 Mrs. Montagne further alleges,...
To continue reading
Request your trial