Morgantown Excavators, Inc. v. Huntington Nat'l Bank (In re Godfrey)
| Decision Date | 18 September 2015 |
| Docket Number | Case No. 1:12–bk–570,Case No. 1:12–bk–1473,Adv. Proc No. 1:13–ap–24 |
| Court | U.S. Bankruptcy Court — Northern District of West Virginia |
| Parties | In re: Shirley E. Godfrey, Debtor. In re: Morgantown Excavators, Inc., Debtor Morgantown Excavators, Inc., and Shirley E. Godfrey, Plaintiffs, v. The Huntington National Bank, and Myron Bowling Auctioneers, Inc., Defendants. |
Morgantown Excavators Inc, pro se.
Patrick S. Cassidy, Martin P. Sheehan, Special Counsel, Wheeling, WV, Todd Johnson, Johnson Law, PLLC, Morgantown, WV, for Debtor.
Shirely E. Godfrey, Morgantown Excavators, Inc. (“MEI”), and their respective Chapter 7 bankruptcy estates (collectively, the “Plaintiffs”), filed their complaint against The Huntington National Bank (“HNB”) and Myron Bowling Auctioneers, Inc. (“Myron Bowling”), alleging multiple violations of the West Virginia Commercial Code and other applicable state law based on HNB's sale of MEI's equipment collateral to Myron Bowling.
HNB seeks entry of three declarations on summary judgment: (1) MEI and Mr. Godfrey waived the right to receive notice of default from HNB; (2) HNB complied with its contractual and statutory obligations to provide notices of disposition of collateral to MEI and Mr. Godfrey by sending the notices in care of their attorney; and (3) HNB sold MEI's equipment to Myron Bowling with reasonable notice and in a commercially reasonable manner.
Myron Bowling also seeks entry of summary judgment on the grounds that it purchased MEI's equipment from HNB in good faith without notice of any sale defect under W. Va.Code § 46–9–617(b).
For the reasons stated herein, the court will grant summary judgment on the first two requested declarations by HNB, deny summary judgment on the third, and will dismiss Myron Bowling as a defendant to the Plaintiffs' complaint.
Federal Rule of Civil Procedure 56, made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment is only appropriate if the movant demonstrates “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A party seeking summary judgment must make a prima facie case by showing: first, the apparent absence of any genuine dispute of material fact; and second, the movant's entitlement to judgment as a matter of law on the basis of undisputed facts. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The movant bears the burden of proof to establish that there is no genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Demonstrating an absence of any genuine dispute as to any material fact satisfies this burden. Id. at 323, 106 S.Ct. 2548. Material facts are those necessary to establish the elements of the cause of action. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Thus, the existence of a factual dispute is material—thereby precluding summary judgment—only if the disputed fact is determinative of the outcome under applicable law. Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.1994). A movant is entitled to judgment as a matter of law if “the record as a whole could not lead a rational trier of fact to find for the non-movant.” Williams v. Griffin, 952 F.2d 820, 823 (4th Cir.1991).
If the moving party shows that there is no genuine dispute of material fact, the nonmoving party must set forth specific facts that demonstrate the existence of a genuine dispute of fact for trial. Celotex Corp., 477 U.S. at 322–23, 106 S.Ct. 2548. The court is required to view the facts and draw reasonable inferences in the light most favorable to the nonmoving party. Shaw, 13 F.3d at 798. However, the court's role is not “to weigh the evidence and determine the truth of the matter [but to] determine whether there is a need for a trial.” Anderson, 477 U.S. at 249–50, 106 S.Ct. 2505. Nor should the court make credibility determinations. Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir.1986). If no genuine issue of material fact exists, the court has a duty to prevent claims and defenses not supported in fact from proceeding to trial. Celotex Corp., 477 U.S. at 317, 323–24, 106 S.Ct. 2548. Thus, for the movant to prevail on its motion for summary judgment, it must demonstrate that the material facts are not in dispute and there is an absence of evidence to create a triable issue regarding every necessary element of its claims.
Mr. Godfrey was the principal and sole shareholder of MEI. To finance its operations, MEI executed several promissory notes to HNB on April 9, 2010. Each of the notes was personally guaranteed by Mr. Godfrey,1 and MEI granted HNB a security interest in multiple categories of collateral—including its equipment.
MEI did not maintain payments on its promissory notes to HNB and the parties executed two subsequent forbearance agreements, the first on June 1, 2011, and the second on November 4, 2011. By its terms, omitting a prior event of default, the November 4, 2011 forbearance agreement expired on March 2, 2012. Norman Solomon, the Vice President of HNB's Special Assets Division, anticipated MEI's default under the November 4, 2011 forbearance agreement and the necessity to sell MEI's equipment. On January 19, 2012, Debra Bowers, MEI's and Mr. Godfrey's attorney, noted in a letter to HNB that MEI was in default for three monthly payments.
The following day, HNB's counsel wrote to Ms. Bowers stating that HNB would be engaging an auction company to repossess and prepare MEI's equipment for sale. Two companies came to look at MEI's equipment for the purpose of potentially buying and/or selling it. Also, other business entities interested in potentially acquiring MEI's assets made inquiry to HNB. One of those entities, Pyle Equipment, attempted to contact HNB about purchasing MEI's equipment, which it believed to have a total value in excess of $600,000. While Pyle Equipment was unsuccessful in obtaining any response from HNB, on February 27, 2012, HNB executed an asset purchase agreement with Myron Bowling for certain equipment in MEI's possession. The purchase price was $535,000. In the asset purchase agreement, the parties acknowledged that HNB may have to transfer certain equipment to Myron Bowling through a sale under Article 9 of the Uniform Commercial Code. Phillip E. Langer, the attorney for Myron Bowling, submitted a declaration in conjunction Myron Bowling's motion of summary judgment stating: (Document No. 129, Ex. 1).
On March 2, 2012, HNB wrote Ms. Bowers that “Myron Bowling Auctioneers will be coming to pick up equipment collateral on Monday, March 5, 2012, as [HNB's] agent.” (Document No. 154, Ex. 15). On March 22, 2012, HNB issued its notice of private disposition that it was going to sell MEI's equipment “sometime after April 9, 2012.” (Document No. 113, Ex. L). Two notices of private disposition were sent by HNB: one to MEI and one to Mr. Godfrey. Both notices were mailed “c/o Debra Bowers” at her law firm address—not to MEI's business address or Mr. Godfrey's home address. One day later, on March 23, 2012, Myron Bowling paid HNB the full purchase price for MEI's equipment.
Meanwhile, MEI, through its regular business mail, received an auction flyer from Myron Bowling wherein a public auction was scheduled for MEI's equipment on April 20, 2012. On April 5, 2012, Ms. Bowers made a settlement offer to HNB of $1,300,000 whereby MEI would pay it proceeds from certain real property sales by May 1, 2012, and pay the rest in cash. In response, HNB's counsel emailed Mr. Bowers on April 5, 2012, and agreed to postpone foreclosure sales of certain real estate, but stated the April 9, 2012 private sale of MEI's equipment would go forward as planned.
The date of private disposition noticed for “sometime after April 9, 2012” and Myron Bowling's public auction scheduled for April 20, 2012, caused some confusion on the part of Ms. Bowers and her clients. Ms. Bowers wrote HNB's counsel on April 6, 2012: (Document No. 154, Ex. 21).
In the late afternoon on Friday, April 6, 2012, counsel for HNB responded that HNB had accepted an offer from Myron Bowling to purchase MEI's equipment in a private sale, which would occur after the following Monday unless HNB received a better offer. In addition, HNB's counsel explained that the notice of public sale was effected by Myron Bowling—not HNB—and Myron Bowling intended to auction MEI's equipment after purchasing it from HNB.
On April 9, 2012, MEI submitted a bid for its equipment in the amount of $500,000 and requested an accounting and the details of the previously submitted bids. In submitting its bid, MEI was not aware of the amount Myron Bowling agreed to pay under its asset purchase agreement, the identity of other potential purchasers, or the amount of other offers. On April 10, 2012, HNB's counsel informed Ms. Bowers that it received two offers for the equipment in addition to MEI's letter bid. HNB determined that Myron Bowling had the highest and best offer, which HNB had accepted. HNB executed the bill of sale to Myron Bowling on April 18, 2012, and Myron Bowling subsequently...
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Morgantown Excavators, Inc. v. Huntington Nat'l Bank (In re Godfrey)
...filed by HNB and Myron Bowling. The Bankruptcy Estates of Morgantown Excavators, Inc. v. The Huntington National Bank (In re Godfrey) , 537 B.R. 271 (Bankr.N.D.W.Va.2015). Nonetheless, the court will briefly recite certain key facts.MEI executed multiple promissory notes to HNB on April 9, ......