Williams et al v. Porter Bancorp, Inc. et al

Filing 165

ORDER by Judge David J. Hale on 11/21/2017 - The Findings of Fact, Conclusions of Law, and Recommendation of Magistrate Judge Colin H. Lindsay (DN 162) are ADOPTED in part. PBI Bank, Inc.'s motion for summary judgment (D.N. 127) is GRANTED in part and DENIED in part. PBI Bank, Inc.'s motion to refer the case to a magistrate judge for final disposition is DENIED. cc: Counsel(DAK)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
JONATHAN C. WILLIAMS, et al.,

Plaintiffs,

v.

Civil Action No. 3:13-cv-1166-DJH-CHL

PBI BANK, INC., et al.,

Defendants.
* * * * *
ORDER

This case arises from a promissory note in which Plaintiffs promised to repay Defendant
PBI Bank, Inc. for a $5.25 million loan. (See Docket No. 6-1) Plaintiffs sued Defendants for
allegedly illegal banking and lending practices. (D.N. 1) PBI Bank counterclaimed for unpaid
principal, interest, and late fees under the note. (D.N. 6) PBI Bank also filed a third-party
complaint against other parties believed to have an interest in the collateral that secured the note.
(Id.) On September 8, 2017, the Court dismissed all claims asserted by Plaintiffs and entered
judgment in favor of PBI Bank with respect to its counterclaim against Plaintiffs. (D.N. 157;
D.N. 158) Thus, only PBI Bank’s third-party claims remain.
I.

PBI Bank’s Motion for Summary Judgment
Prior to the Court’s order disposing of the counterclaim, PBI Bank filed a motion for

summary judgment on all of its claims. (D.N. 127) In its supporting memorandum, PBI Bank
states that the third-party defendants were named “solely because of their interest in the property
that is subject to counterclaim foreclosure.” (D.N. 127-1, PageID # 687) No party responded to
the summary-judgment motion. The Court referred the motion to United States Magistrate Judge
Colin H. Lindsay for report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). (D.N.
157)

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Judge Lindsay issued his Findings of Fact, Conclusions of Law, and Recommendation on
October 11, 2017. (D.N. 162) He concluded that there was no genuine issue of material fact as
to the claims against third-party defendants American Tax Funding, LLC and Jamos Fund I, LP,
because they both disclaimed any interest in the property at issue. (Id., PageID # 1084) Further,
Judge Lindsay found that the proper procedure for seeking judgment against third-party
defendants Mitch Taylor; Sarah Taylor; AES Realty, LLC; FTS Realty, LLC; and DES Realty,
LLC was via Federal Rule of Civil Procedure 55, because none of those third-party defendants
answered the third-party complaint. (Id., PageID # 1085) Finally, Judge Lindsay noted that PBI
Bank provided no legal support for its request for an order of sale of the various collateral. (Id.,
PageID # 1085-86) Judge Lindsay therefore recommended that the Court grant PBI Bank’s
motion insofar as it seeks summary judgment against American Tax Funding and Jamos Fund I;
deny the motion with respect to Mitch Taylor, Sarah Taylor, AES Realty, FTS Realty, and DES
Realty; deny the motion as moot in all other regards; and deny without prejudice the request for
order of sale and appointment of auctioneer. (Id., PageID # 1086)
No party objected to the report and recommendation. The Court need not even review a
magistrate judge’s findings when no objection is made. See Thomas v. Arn, 474 U.S. 140, 15052 (1985). Nevertheless, the Court has reviewed the record and agrees with Judge Lindsay’s
recommendation that (1) summary judgment should be granted against American Tax Funding
and Jamos Fund I; (2) summary judgment should be denied with respect to Mitch Taylor and
Sarah Taylor; and (3) PBI Bank’s request for an order of sale and appointment of an auctioneer
should be denied without prejudice. However, the Court will deviate from Judge Lindsay’s
recommendation as to the claims against AES Realty, FTS Realty, and DES Realty.
The report and recommendation states that “it does not appear that Mitch Taylor, Sarah
Taylor, AES Realty, FTS Realty, and DES Realty answered the third-party complaint.” (D.N.
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162, PageID # 1085) The Court similarly finds that Mitch Taylor and Sarah Taylor never
answered the third-party complaint and that Rule 55 is thus the proper procedure for seeking
judgment against them. But the Court’s review of the record reveals that AES Realty, FTS
Realty, and DES Realty responded to the third-party complaint. (See D.N. 10) Therefore, Rule
55 is not the proper procedure for seeking judgment against them. However, the Court finds that
summary judgment should be granted against FTS Realty and DES Realty, because in their
answer to the third-party complaint, they both denied that they have an interest in the real
property at issue. (See D.N. 6, PageID # 73-74; D.N. 10, PageID # 268-69) AES Realty, on the
other hand, admitted that it may be claiming an interest in the real property at issue. (See D.N. 6,
PageID # 73; D.N. 10, PageID # 268)
PBI Bank has pointed to evidence in the record that it recorded mortgages on real
property in Fayette County, Kentucky, and Bourbon County, Kentucky, as security for payment
of the note. (See D.N. 127-1, PageID # 688-89; D.N. 127-2, PageID # 715-16; D.N. 6-2; D.N. 64) AES Realty merely admitted in its answer that it might be claiming an interest in real
property by virtue of a recorded deed. (See D.N. 6, PageID # 73; D.N. 10, PageID # 268) But it
failed to present proof of its claimed interest, in the form of a recorded deed or otherwise. As
noted, it has also failed to object to the report and recommendation. The Court will therefore
grant summary judgment against AES Realty as well. See Hutchison v. C.I.T. Corp., 576 F.
Supp. 1, 3 (W.D. Ky. 1982) (concluding that Kentucky law compels a finding that recorded
security interests are superior to unrecorded security interests); see also Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 256 (1986) (explaining that the nonmoving party “may not rest upon
mere allegation or denials of [its] pleading, but must set forth specific facts showing that there is
a genuine issue for trial”).

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II.

PBI Bank’s Motion to Refer the Case to a Magistrate Judge for Final Disposition
PBI Bank has also filed a motion to refer all matters in this case (including dispositive

motions) to Magistrate Judge Lindsay. (D.N. 151) In support, PBI Bank asserts that all parties
have impliedly consented to have a magistrate judge decide all matters in the case. (Id., PageID
# 1059-60)
“Upon the consent of the parties, a full-time United States magistrate judge . . . may
conduct any or all proceedings in a jury or nonjury civil matter and order the entry of judgment
in the case, when specifically designated to exercise such jurisdiction by the district court or
courts he serves.” 28 U.S.C. § 636(c)(1). “[I]mplied consent to a magistrate judge’s exercise of
jurisdiction may be accepted where the litigant voluntarily appeared before the magistrate judge
after notice that consent was required and could be refused.” Brown v. AmSouth Bank, No. 155468, 2016 WL 4271874, at *3 (6th Cir. Mar. 23, 2016); see also Roell v. Withrow, 538 U.S.
580, 590-91 (2003) (recognizing implied consent where “the litigant or counsel was made aware
of the need for consent and the right to refuse it, and still voluntarily appeared . . . before the
Magistrate Judge”).
In both Roell and Brown, however, the parties consented to have a magistrate judge
preside over the entire case. See 538 U.S. at 582-83; 2016 WL 4271874, at *3. Both cases
proceeded in front of a magistrate judge all the way to final judgment. See Roell, 538 U.S. at
583; Brown, 2016 WL 4271874, at *3. PBI Bank argues that consent to magistrate-judge
jurisdiction should be implied in this case because the parties have participated in this matter
with Judge Lindsay serving as magistrate judge, with no party raising any objection to him
hearing any pending motion or ruling on any matter. (D.N. 151, PageID # 1059-60) But the
case was referred to Judge Lindsay for resolution of non-dispositive matters only, with
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occasional referrals of specific dispositive matters for report and recommendation. (D.N. 54;
D.N. 157) The parties’ acquiescence to those limited referrals does not amount to implied
consent to have the entire case referred to a magistrate judge for final disposition. Cf. Roell, 538
U.S. at 583-84, 591 (finding implied consent where parties proceeded in front of magistrate
judge all the way through trial). For this reason, the Court concludes that all parties have not
consented to magistrate-judge jurisdiction at this time.
III.

CONCLUSION
For the reasons explained above, and the Court being otherwise sufficiently advised, it is

hereby
ORDERED as follows:
(1)

The Findings of Fact, Conclusions of Law, and Recommendation of Magistrate

Judge Colin H. Lindsay (D.N. 162) are ADOPTED in part and INCORPORATED by reference
herein to the extent set forth above.
(2)

PBI Bank, Inc.’s motion for summary judgment (D.N. 127) is GRANTED as to

PBI Bank, Inc.’s third-party claims against American Tax Funding, LLC; Jamos Fund I, LP; FTS
Realty, LLC; DES Realty, LLC; and AES Realty, LLC. The motion is DENIED with respect to
PBI Bank, Inc.’s claims against third-party defendants Mitch Taylor and Sarah Taylor. PBI
Bank, Inc. may move for entry of default and default judgment against Mitch Taylor and Sarah
Taylor within thirty (30) days of the date of entry of this Order.
(3)

PBI Bank, Inc.’s motion for summary judgment is DENIED as moot in all other

respects.
(4)

PBI Bank, Inc.’s motion to refer the case to a magistrate judge for final

disposition is DENIED.
November 21, 2017

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David J. Hale, Judge
United States District Court