MANNING FAMILY TRUST; RONALD C. MANNING, AS TRUSTEE AND INDIVIDUALLY; AND DAVID JOHN WESTWICK, JOHN GEORGE RUSSELL, AND SHONA PATRICIA MANNING, TRUSTEES OF THE MANNING FAMILY TRUST v. BANK ONE LEXINGTON, NA; UNITED STATES OF AMERICA; AND SIMON MANNING
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RENDERED:
DECEMBER 22, 2000; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1999-CA-000654-MR
MANNING FAMILY TRUST; RONALD C.
MANNING, AS TRUSTEE AND
INDIVIDUALLY; AND DAVID JOHN WESTWICK,
JOHN GEORGE RUSSELL, AND SHONA PATRICIA
MANNING, TRUSTEES OF THE MANNING
FAMILY TRUST
APPELLANTS
v.
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE LEWIS G. PAISLEY, JUDGE
ACTION NO. 93-CI-01774
BANK ONE LEXINGTON, NA;
UNITED STATES OF AMERICA; AND
SIMON MANNING
APPELLEES
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE:
BUCKINGHAM, JOHNSON, AND MILLER, JUDGES.
BUCKINGHAM, JUDGE:
The Manning Family Trust, its trustees, and
Ronald Manning (Manning) appeal from orders of the Fayette
Circuit Court granting summary judgment to Bank One, Lexington,
N.A., (the bank), and denying its motion to alter, amend, or
vacate.
Because we have concluded the trial court erred in
granting summary judgment to the bank, we reverse and remand.
In May 1990, Manning allegedly entered into an oral
agreement with Dr. John W. Backer to purchase Female Star, a
thoroughbred mare in foal to Alydar, and her Alydar colt
(hereinafter referred to as the Female Star package) for
$1,000,000.
Under the terms of the agreement, Manning was to pay
$50,000 as a down payment, $600,000 at the closing, and the
balance of $350,000 plus interest over the next two years.
Manning tendered the $50,000 down payment, but Backer failed or
refused to close the deal.
Manning then filed suit against him
in the Fayette Circuit Court.
After a bench trial in early 1992, the court entered an
opinion and order in Manning’s favor.
While Backer denied an
agreement existed, the court found “there is clear and convincing
evidence that a contract was formed between Dr. Backer and Ron
Manning.”1
Thereafter, on February 27, 1996, the court entered a
judgment in favor of Manning and against Backer in the amount of
$1,483,294.
On March 22, 1996, the parties entered into a
forbearance agreement “given Backer’s present financial condition
and the prospect of obtaining any further recovery against Backer
on the Judgment held by Manning.”2
1
Based on this finding in the Manning/Backer litigation,
the trial court herein assumed, for the purpose of the summary
judgment motions, that there was such a contract.
2
The forbearance agreement contained various provisions
including the division of the proceeds from the sale of a filly
foal, the right of Manning to proceed against the $550,000
supersedeas bond posted in the case, the right of Manning to
receive funds held on deposit with the master commissioner,
Backer’s agreement not to appeal, Manning’s agreement to forbear
further collection efforts, and Backer’s waiver of any claim,
privilege, or confidentiality raised by other parties with
(continued...)
-2-
Manning and Backer were both customers of the bank at
the time of their oral agreement for the sale of the Female Star
package, and Backer owed the bank $680,000 which was unsecured
and due.
Also, the bank had given Manning a written loan
commitment of $450,000 to use in the purchase of the Female Star
package.3
Manning contends that after its oral agreement with
Backer but before the deal was closed, the bank, by and through
its president, Ben Elkin, told Backer it would not allow him to
sell the Female Star package and finance part of the purchase
price himself as had been contracted.
Elkin contends that he
merely advised Manning not to enter into the deal and be Backer’s
“banker” and that he was unaware of any contract.
Manning
maintains, however, that the bank required Backer to give it a
lien on the Female Star package and told him that it would not
release its lien unless the $680,000 delinquent debt was paid in
full.
Manning contends that Backer refused to close the deal
based on the refusal of the bank to let him close and based on
the advice of his attorney, William T. Bishop III.
Manning
claims these events occurred without its knowledge.
In an unrelated matter, on July 5, 1990, the bank
issued a $600,000 loan commitment to Manning.
The loan was to be
secured by Sally’s Ride, a mare which Manning hoped to buy.
Manning was unable to purchase the Sally’s Ride package, which
2
(...continued)
respect to Manning’s examination of documents or procuring
testimony in connection with its litigation against the bank or
other parties.
3
The loan commitment was actually given by First Security
National Bank & Trust Co., Bank One’s predecessor in interest.
-3-
included the mare along with her foal and certain breeding
rights, but on December 11, 1990, Manning executed a promissory
draw note pursuant to the July loan commitment and proposed to
draw on it to purchase other horses.
The bank, however, declined
to fund these purchases.
In May 1993, Manning filed suit against the bank in the
Fayette Circuit Court.
Manning, which had prevailed in its
litigation against Backer, claimed the bank had improperly
interfered with its contract to purchase the Female Star package
from Backer.
Manning also claimed the bank acted improperly in
not funding its purchase of other horses.
The trial court,
however, found no merit in those claims or the other claims of
Manning.
Thus, the court granted the bank’s summary judgment
motion and denied Manning’s.
Concerning Manning’s claim that the bank improperly
interfered with Manning’s contract with Backer, the court held as
a matter of law that the bank had no liability because it was
“clearly acting in good faith to protect its own legitimate
interest” and “[t]here is simply no evidence to show that the
[b]ank acted wrongfully.”
Concerning the refusal of the bank to
fund Manning’s purchase of additional horses in December 1990,
the court held that the December 11, 1990 note was tied to the
July 1990 loan commitment which related solely to the purchase of
the Sally’s Ride package.
In short, the trial court held as a matter of law that
the bank had not committed the tort of improper interference with
contractual relations in connection with the Manning/Backer
-4-
agreement and also held as a matter of law that the bank was
within its rights when it refused to finance Manning’s purchase
of other horses pursuant to the December 1990 note.
The trial
court also dismissed Manning’s conspiracy claim because it was
based on the same facts which supported its other claims.
Finally, it dismissed Manning’s claim that the bank had breached
an implied covenant of good faith and fair dealing on the ground
that such claim was based on alleged unenforceable verbal
promises.
This appeal followed.
Manning contends the trial court erred in granting the
bank’s motion for summary judgment by failing to apply the proper
CR4 56.03 provides in part that summary judgment
standard.
“shall be rendered forthwith if the pleadings, depositions,
answers to interrogatories, stipulations, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.”
“The record must
be viewed in a light most favorable to the party opposing the
motion for summary judgment and all doubts are to be resolved in
his favor.”
Steelvest, Inc. v. Scansteel Service Center, Inc.,
Ky., 807 S.W.2d 476, 480 (1991).
Manning asserts the trial court
did not view the evidence in a light most favorable to it and
ignored, overlooked, or misinterpreted evidence of record.
Manning’s first assignment of error is its argument
that the trial court erred in granting summary judgment to the
bank on its (Manning’s) claim of improper interference with
4
Kentucky Rules of Civil Procedure.
-5-
contractual relations in connection with the contract with Backer
to purchase the Female Star package.
Citing National Collegiate
Athletic Assoc. v. Hornung, Ky., 754 S.W.2d 855 (1988), the trial
court stated that the bank had done nothing wrong in demanding
payment in full from Backer and requiring a lien which had to be
paid in full before it would be released.
In Hornung, our
supreme court held that “the party whose interference is alleged
to have been improper may escape liability by showing that he
acted in good faith to assert a legally protected interest of his
own.”
Id. at 858.
The trial court determined as a matter of law
that the bank “was clearly acting in good faith to protect its
own legitimate interest.”
The court further held that “[t]here
is simply no evidence to show that the [b]ank acted wrongfully.”
In order to properly analyze this issue, we must recite
additional facts.
William T. Bishop III, an attorney who
represented Backer in his veterinary medicine practice and who
also represented the bank, advised Backer that his agreement with
Manning was unenforceable because it was not in writing and that
he should not close the deal.
When Backer refused to close the
deal, Manning employed Harvie B. Wilkinson, an attorney in the
same firm as Bishop,5 to send Backer a letter demanding that the
sale be closed pursuant to the contract.
When the conflict in
representation came to light, Wilkinson withdrew from his
representation of Manning.
5
Both Wilkinson and Bishop were attorneys with the Stoll,
Keenon and Park law firm in Lexington, Kentucky.
-6-
Wilkinson had been introduced to Manning by the bank’s
loan officer, Scott Flowers, to assist in the closing on a loan
in connection with Manning’s purchase of a farm in Woodford
County.
Following Wilkinson’s demand letter to Backer, the bank
required Backer to give it a lien on the Female Star package and
related to him that its lien would not be released until the
$680,000 debt was paid in full.
Nevertheless, the bank had given
Manning a loan commitment to purchase the Female Star package
and, according to Manning, was aware of the Manning/Backer
agreement.
After Wilkinson withdrew from his representation of
Manning, Manning procured new counsel and filed the original suit
in the Fayette Circuit Court against Backer and the bank.
Manning’s claim against Backer was for specific performance
and/or damages for breach of the oral agreement and against the
bank due to the lien that had been placed on the Female Star
package.
Wilkinson, who had previously sent the demand letter on
behalf of Manning and who was a law partner of Bishop,
represented the bank in defending against Manning’s lawsuit.
Early in the litigation, the bank arranged for Backer to borrow
the $680,000 which he owed to the bank from Central Kentucky
Agricultural Credit Association (Ag Credit) so that the bank
could be paid.
Backer borrowed the money from Ag Credit, and the
bank was paid and the lien released.
Thereafter, Wilkinson
advised Manning’s counsel that the lien had been released and
tendered an agreed order dismissing the bank from the case.
Neither Manning nor the court were informed that Ag Credit now
-7-
held a lien on the Female Star package, and Ag Credit was not
joined as a defendant in Manning’s suit against Backer until
after Manning had obtained a judgment against Backer nearly two
years later.
We agree with the trial court’s reliance on Hornung to
support the proposition that the bank may escape liability by
showing that it acted in good faith to assert a legally protected
interest of its own.
Hornung, 754 S.W.2d at 858.
We disagree,
however, with the trial court’s finding as a matter of law that
the bank was “clearly acting in good faith to protect its own
legitimate interest.”
(Emphasis added.)
The facts we have set
forth above lead to a different conclusion when viewed in a light
most favorable to Manning rather than in a light most favorable
to the bank.
For purposes of considering the bank’s motion for
summary judgment, the trial court was required to view the facts
in a light most favorable to Manning.
480.
Steelvest, 807 S.W.2d at
Viewing the facts in that manner, we believe there was a
genuine issue of material fact concerning whether the bank acted
in good faith in taking the actions that, according to Manning,
caused Backer to fail or refuse to close the deal for the Female
Star package.6
In connection with Manning’s claim for wrongful
interference with contractual relations, the trial court also
held that the “advice” given by bank president Elkin to Backer
that he not close the deal with Manning “cannot form the basis of
6
Manning’s expert witness on banking testified that the
bank’s conduct in relation to the Manning/Backer contract
violated the standard of conduct required of banks.
-8-
wrongful interference with the contractual rights of another.”
The trial court relied on the Restatement (Second) of Torts §
772.
We again disagree with the trial court.
If Elkin’s
statement to Backer amounted to advice upon which Backer relied,
we might be inclined to agree with the trial court.
However,
Backer himself has characterized Elkin’s statement to him as a
directive not to close the transaction and not as merely advice.
Again, we believe there is a fact issue in this regard.
The trial court also held that even if the bank had
wrongfully interfered with the Manning/Backer contract, Manning
would nevertheless be barred from recovery due to the forbearance
agreement it entered into with Backer in the previous lawsuit.
Citing Klepper v. First American Bank, 916 F.2d 337 (6th Cir.
1990), the trial court held that Manning’s losses “have been
satisfied” and that he “cannot sue the [b]ank for the same
damages.”
The Klepper case, however, is distinguishable on its
facts from this case.
In that case, Klepper had recovered the
full amount which was owed to him from another party in an
arbitration proceeding.
The court in Klepper recognized the
general rule set forth in Pierce v. Frito-Lay, Inc., Ky., 426
S.W.2d 439 (1968), that only the satisfaction of a judgment or
something equivalent thereto, will bar an action against other
tortfeasors.
Klepper, 916 F.2d at 342.
Because the forbearance
agreement between Manning and Backer did not satisfy Manning’s
judgment against Backer,7 Manning could pursue a cause of action
7
In Backer’s bankruptcy action, the United States
Bankruptcy Court for the Eastern District held that the
(continued...)
-9-
against any joint tortfeasor for the same damages.
We thus
disagree with the trial court’s assertion that the forbearance
agreement provided full satisfaction of Manning’s damages.
The bank also argues that the trial court’s summary
judgment was appropriate because its dismissal from the earlier
Manning/Backer litigation was res judicata.
not address this argument.
The trial court did
As we have noted, the bank was made a
party defendant to the Manning/Backer litigation for the sole
reason that it held a lien on the Female Star package.
It was
dismissed from that litigation by an agreed order once the lien
was released.
The doctrine of res judicata is “applicable not only to
the issues disposed of in the first action, but to every point
which properly belonged to the subject of the litigation in the
first action and which in the exercise of reasonable diligence
might have been brought forward at the time.”
Egbert v. Curtis,
Ky. App., 695 S.W.2d 123, 124 (1985) (emphasis added).
Although
the trial court did not address the issue, it appears to us that
there is at least a fact issue concerning whether Manning knew of
the facts upon which it brought this action when it brought the
original action against Backer and the bank.
We conclude that
summary judgment on the basis of res judicata would not have been
appropriate for this reason.
Manning’s second assignment of error is that the trial
court erred in granting summary judgment to the bank on its
7
(...continued)
forbearance agreement was “a forbearance agreement and it is not
a settlement agreement.”
-10-
(Manning’s) claim that the bank breached its contract under the
July 1990 loan commitment by not funding the December 1990 note
Manning executed for the purpose of borrowing money to purchase
horses other than the Sally’s Ride package.
As we have stated
previously, the bank issued a $600,000 loan commitment to Manning
in July 1990 so that Manning could purchase the Sally’s Ride
package.
Manning was unable, however, to make the purchase.
Approximately six months later, Manning executed a promissory
draw note in an attempt to borrow money to purchase horses other
than the Sally’s Ride package.
The bank declined to fund the
purchase and maintained that the July 1990 loan commitment
related only to the purchase of the Sally’s Ride package.
We agree with the trial court that the July 1990 loan
commitment was expressly for the sole purpose of the Sally’s Ride
package as evidenced by a letter sent by the bank to Manning.
Manning asserts, however, that the bank told him after he failed
to purchase the Sally’s Ride package that the July 1990 loan
commitment would be good for later purchases of horses.
He may
not rely on these alleged verbal representations due to the
provisions of KRS8 371.010(9) which provides:
No action shall be brought to charge any
person:
. . . .
(9) Upon any promise, contract, agreement,
undertaking, or commitment to loan money, to
grant, extend, or renew credit, or make any
financial accommodation to establish or
assist a business enterprise . . . .
8
Kentucky Revised Statutes.
-11-
unless the promise, contract, agreement,
representation, assurance, or ratification,
. . . be in writing and signed by the party
to be charged therewith . . . .
The trial court properly granted the bank summary judgment on
this issue.
Manning also assigns as error the adverse rulings of
the trial court on its claim for concert of action.
This cause
of action related to allegations that the bank and the Stoll,
Keenon and Park law firm conspired to breach the bank’s fiduciary
duties owed to Manning.
The trial court rejected the claim
“because the acts complained of are the same which support the
Plaintiff’s [Manning’s] other claims addressed in this opinion.”
Because we have found there are fact issues regarding Manning’s
claim for improper interference with contractual relations which
precludes summary judgment for the bank, we likewise hold those
same fact issues preclude summary judgment on the concert of
action claim.
Additionally, Manning assigns as error the trial
court’s award of summary judgment for the bank on Manning’s claim
for breach of an implied covenant of good faith and fair dealing.
The trial court held that “to the extent any such promises were
made they are not legally enforceable.”
We agree with Manning
that its claim in this regard was more than a claim based on oral
promises to extend credit and that the trial court erred in
granting summary judgment on this claim.
As we have noted
previously in this opinion, there are genuine issues of material
fact concerning whether the bank acted in good faith in
connection with the Manning/Backer agreement.
-12-
Finally, Manning contends the trial judge erred in
refusing to recuse from this case.
recite further facts.
Again, it is necessary to
At one point in the litigation, the trial
court entered an order that dispositive motions be filed no later
than April 15, 1997, and that the case be tried by a jury on June
16, 1997.
On the last day for dispositive motions to be filed,
the bank’s attorney moved to withdraw from the case citing a
conflict of interest.
On April 17, 1997, the trial court entered
an order permitting counsel for the bank to withdraw and
continuing the trial date.
Unbeknownst to Manning, however, the
trial judge had signed an $85,000 mortgage to the bank only six
days before the order was entered.
A new trial date had been assigned for December 1,
1997, but on November 20, 1997, the trial court informed the
parties that it had denied Manning’s summary judgment motion but
granted the bank’s.
The court apparently informed the parties
that an opinion and order would be issued reflecting the rulings.
Several months passed when, in June 1998, Manning apparently
discovered the trial judge’s mortgage.
A recusal motion was
filed,9 but when the trial court entered its written opinion and
order on February 9, 1999, some fifteen months after advising the
parties of its ruling, the trial court denied the recusal motion.
In denying the motion, the trial judge acknowledged that he had
been a customer of the bank for years prior to the institution of
9
At the hearing concerning the recusal motion, the trial
judge stated that he had no knowledge of the mortgage and the
bank counsel agreed that they had no record of the mortgage.
However, the mortgage had been signed and was recorded on April
15, 1997.
-13-
the lawsuit and that an “equity line” type of account had been
set up years before.
The trial judge related that he had
received nothing from the bank other than the continuing of a
credit line and that the transaction “constitutes no basis for
recusal.”
The trial judge also noted that a complaint had been
filed with the Judicial Retirement and Removal Commission and
that the Commission had found no impropriety.
In support of its argument that the trial court erred
in not granting the motion to recuse, Manning cites SCR10 4.300.
That rule provides in part that “[a] judge should refrain from
financial and business dealings that tend to reflect adversely on
his impartiality[.]”
SCR 4.300, Canon 5, C.(1).
The bank
responds by citing KRS 26A.015 which sets forth circumstances
under which a judge should disqualify himself from a proceeding.
We agree with the bank that the statute does not
specifically state circumstances which would require recusal in
this situation.
KRS 26A.015(2)(e) states, however, that a judge
should disqualify himself “[w]here he has knowledge of any other
circumstances in which his impartiality might reasonably be
questioned.”
From reviewing the taped hearing of the recusal
motion, we understand that the judge no longer has a relationship
with the bank.
Thus, we see no need for the trial judge to
recuse on remand if he has no relationship with the bank.
The opinion and order of the Fayette Circuit Court is
reversed and remanded.
ALL CONCUR.
10
Rules of the Supreme Court.
-14-
BRIEFS AND ORAL ARGUMENT FOR
APPELLANTS:
BRIEF FOR APPELLEE BANK ONE:
William A. Dykeman
Winchester, Kentucky
Victor B. Maddox
R. Gregg Hovious
Dustin E. Meek
Louisville, Kentucky
ORAL ARGUMENT FOR APPELLEE
BANK ONE:
Victor B. Maddox
Louisville, Kentucky
-15-
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