Tri-State Truck Ins. Ltd. v. First Nat'l Bank of Wamego
| Decision Date | 03 August 2011 |
| Docket Number | No. 09-4158-SAC,09-4158-SAC |
| Parties | TRI-STATE TRUCK INSURANCE, LTD., TST, LTD., and ANDREW B. AUDET, Plaintiffs, v. FIRST NATIONAL BANK OF WAMEGO, Defendant. |
| Court | U.S. District Court — District of Kansas |
This declaratory judgment case comes before the court on cross motions for summary judgment filed by all parties.1 Intervenor-Defendant, The Gibson Family Limited Partnership, has adopted and incorporated the motion for summary judgment and supporting memoranda filed by Defendant First National Bank of Wamego. Dk. 95. Also before the court is Plaintiffs' motion to strike portions of an affidavit relied upon by Defendant First National Bank of Wamego (FNBW). Dk. 85.
A court grants a motion for summary judgment under Rule 56 of the Federal Rules of Civil Procedure if a genuine issue of material fact does not exist and if the movant is entitled to judgment as a matter of law. The court is to determine "whether there is the need for a trial-whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably beresolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). "Only disputes over facts that might affect the outcome of the suit under the governing law will ... preclude summary judgment." Id. There are no genuine issues for trial if the record taken as a whole would not persuade a rational trier of fact to find for the nonmoving party. Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
"Cross-motions for summary judgment are to be treated separately; the denial of one does not require the grant of another." Buell Cabinet Co. v. Sudduth, 608 F.2d 431, 433 (10th Cir. 1979). To the extent the cross-motions overlap, however, the court addresses the legal arguments together. Where the parties file cross motions for summary judgment, the court is "entitled to assume that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts." James Barlow Family Ltd. Partnership v. David M. Munson, Inc., 132 F.3d 1316, 1319 (10th Cir. 1997), cert. denied, 523 U.S. 1048 (1998).
Plaintiff Tri-State Truck Insurance, Ltd. ("Tri-State") is a business entity organized in the State of Pennsylvania. Plaintiff TST, Ltd. ("TST") is a business entity organized in the State of North Dakota. Plaintiff Andrew B. Audet is an individual residing in the State of Pennsylvania, and at all times relevant was the Chairman, CEO, and sole stockholder of Plaintiffs Tri-State and TST. Defendant First National Bank of Wamego (FNBW) is a Kansas banking institution with its principal place of business in Wamego, Kansas. Intervenor-Defendant, The Gibson Family Limited Partnership, is aparticipating lender.
On June 30, 2006, Plaintiff Tri-State entered into a "Commercial Loan Agreement" ("CLA") along with an "Addendum to Commercial Loan Agreement" ("CLA Addendum") of the same date (collectively "the original CLA"). Under the original CLA, Tri-State was the "borrower" and Brooke Credit Corporation was the "lender." Brooke Credit Corporation later became known as Aleritas. Under the original CLA, Aleritas loaned Tri-State $8,216,000.00, which was to be repaid over time with interest ("Loan No. 5483"). Tri-State received the loan proceeds, promised to repay the principal at the prescribed interest rate in monthly installments, and agreed to comply with all the loan terms and covenants in Loan 5483. In connection with that loan, and on that same date, Plaintiff Audet and Aleritas entered into a Guaranty.
Also on June 30, 2006, Plaintiff Audet and Aleritas entered into a separate loan, as evidenced by a promissory note and a "Stock Pledge Agreement," whereby Aleritas loaned $436,000.00 to Audet. ("Loan No. 5484"). Audet received the loan proceeds, promised to repay the principal at the prescribed interest rate in monthly installments, and agreed to comply with all the loan terms and covenants in Loan 5484.
When Plaintiffs entered into the Loans,2 they dealt only with Aleritas and not with any participating banks. Plaintiffs understood at that time that Aleritas would often sell participation interests in loans it originated, but Plaintiffs did not know what percentage of their loans might be participated by Aleritas, or who the participating entities might be.
On or about the date of the Loans, various participating lenders entered intoParticipation Certificates and Agreements with Aleritas, whereby each participating lender acquired an interest in Loan Nos. 5483 and/or 5484. FNBW purchased an 8.520% participating interest in Loan No. 5483, but did not receive a complete set of the loan documents relating to its loan participation until two or three days after that purchase. Other participating lenders, including the Gibson Family Limited Partnership, also purchased participating interests in Loan No. 5483. Two participating banks purchased participating interests in Loan No. 5484. Initially, the banks collectively participated in approximately 95% of the Loans.
Prior to the closing of the Loans on June 30, 2006, Aleritas represented to the potential participating lenders that it would retain 5% of Loan No. 5483 to show its support of the transaction. Less than six weeks after the loan closed, Aleritas, unbenownst to the participating lenders, sold the 5.025% ($415,000) stake of that loan which it had initially retained, making 100% of the Loans participated.
On or about January 19, 2007, Plaintiff Audet and Aleritas entered into a second "Stock Pledge Agreement" in which the stock of TST was pledged to secure Audet's obligation under the promissory note of June 30, 2006. Also in January of 2007, a "Second Addendum to Commercial Loan Agreement" was executed, which added Plaintiff TST to the list of borrowers under the original CLA, making the terms of the original CLA applicable to Plaintiff TST.
Aleritas acted as the administrator for the Loans until September 12, 2008. As administrator, Aleritas promised the participating lenders that it would, among other things, collect payments from Plaintiffs and remit to the participating lenders their respective percentages of the payments and any shared borrowers' fees. In the fall of2008, Aleritas experienced financial difficulties, and discontinued some or all of its normal business operations.3 On September 12, 2008, by way of an Assignment and Assumption Agreement, Aleritas assigned the payment processing loan administration duties on the Loans to FNBW. Neither the Participation Agreements nor a pro rata list of participating lenders was attached to the Assignment and Assumption Agreement.
That same day, Plaintiffs acknowledged and consented to that assignment, without having seen a list of participating lenders or their Participation Agreements, and authorized FNBW to initiate electronic funds withdrawals for Plaintiffs' monthly loan payments on the Loans. Plaintiffs did not see the Participation Certificate terms until discovery in this case, and did not know that FNBW had any interest in the Loans until September of 2008, when it received a letter saying that Aleritas was transferring the "payment servicing" of the Loans to FNBW, with whom it had "partnered" "to ensure quality payment processing." Dk. 74, Exh. 112. That same letter advised Plaintiffs that the Loans had "not been transferred or sold by Aleritas." The parties agree that Aleritas has not to date sold or transferred the Loans, but has sold participation interests in them.
Throughout the life of the Loans, Aleritas was "the lender" as defined and identified in the subject loan documents. Under Loan No. 5484, the term "Loan Documents" includes:
... all documents and instruments (including, without limitation, promissory notes, loan agreements, security agreements, guaranties and stock pledge agreements) which evidence and/or secure any obligations of Borrower or any of theGuarantors to Lender.
This definition includes the Commercial Loan Agreement, the Addendum to Commercial Loan Agreement, the Second Addendum to Commercial Loan Agreement for Loan No. 5483, the Promissory Note, the June 30, 2006 Stock Pledge Agreement, and the Jan.19, 2007 Stock Pledge Agreement for Loan No. 5484, but does not include the Participation Certificates.
Plaintiffs made payments on the Loans through November of 2009, and timely provided all required reports under the Loans until December 14, 2009, first to Aleritas, then to FNBW, after Aleritas' assignment to FNBW. On December 14, 2009, a Pennsylvania court rescinded the Loans, finding they had been procured by Aleritas' fraud, as noted below. The parties agree that but for the judgment of rescission in the Pennsylvania case, Plaintiffs would still be performing under the Loans.
The Pennsylvania Action
On September 23, 2009, Plaintiffs filed an action in Bucks County, Pennsylvania4 against Aleritas and Brooke Capital Advisors, Inc. (BCA).5 The suit alleged breach of contract against BCA, fraud by Aleritas and BCA in inducing the Plaintiffs to enter into Loan Nos. 5483 and 5484, and negligent misrepresentation against Aleritas and BCA. Plaintiffs did not notify FNBW or any other participating lenders about the lawsuit before or during its pendency, and none of them was named as a party. Neither the Loan documents nor any other documents require Plaintiffs to give notice of that action to anyparticipating lender. When neither Aleritas nor BCA appeared in the case, Plaintiffs obtained a judgment by default on October 30, 2009.
On December 14, 2009, the Pennsylvania case was tried on the issue of damages. Defendants Aleritas and BCA again failed to appear, and Plaintiffs introduced into the record the sworn testimony of Plaintiff Audet. On December 14, 2009, the Pennsylvania order specifically...
To continue reading
Request your trial