Allenspach-Boller et al v. United Community Bank et al

Filing 133

ORDER granting in part and denying in part 89 motion for judgment on the pleadings; granting 91 motion for judgment on the pleadings. The parties shall confer on a revised scheduling order and submit a proposed revised scheduling order on or before Nov. 30, 2020. Signed on 11/16/20 by District Judge Greg Kays. (Law Clerk)

UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
MARIANNE ALLENSPACH-BOLLER,
ERIC J. ALLENSPACH, and RELIABLE
MACHINE & ENGINEERING, INC.,
Plaintiffs/Counterclaim
Defendants,
v.
UNITED COMMUNITY BANK,
Defendants/Counterclaim
Plaintiff,
and
JANET FOSTER and MARLA KEPHART,
Defendants.

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Case No. 5:19-cv-06073-DGK

ORDER GRANTING IN PART DEFENDANTS’ MOTION FOR JUDGMENT
ON THE PLEADINGS
This lawsuit arises from Plaintiffs Reliable Machine & Engineering, Inc. (“Reliable
Machine”), Eric Allenspach, and Marianne Allenspach-Boller’s allegations that Defendant United
Community Bank (“UCB”) and its employees, Defendants Marla Kephart and Janet Foster
(“Individual Defendants”), failed to perform the necessary underwriting requirements for a Small
Business Administration (“SBA”) loan and to timely report fraud once it was uncovered, despite
assuring Plaintiffs it would do so. UCB brings various counterclaims seeking the balance due on the
loan.
Now before the Court are Defendants’ Motions for Judgment on the Pleadings (Docs. 89, 91)
and related briefing (Docs. 90, 92, 102, 117). Finding Plaintiffs waived their claims against
Defendants by signing written claims waivers when they subsequently modified the loan, the Court
GRANTS Defendants’ motion IN PART.
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Background
I.

Factual Background
The Court considers the following facts in the light most favorable to the plaintiffs. On

December 31, 2015, United Community Bank loaned Reliable Machine $1,744,000 in an SBA loan
to purchase Rood Machine & Engineering, Inc. (“Rood Machine”), a machine shop and warehouse
located in Polo, Missouri. Plaintiffs Eric Allenspach and Marianne Allenspach-Boller, the owners
and officers 1 of Reliable Machine, personally guaranteed the loan. The loan was also secured by a
security interest in certain real estate owned by the individual Plaintiffs and by the real estate included
in the purchase of Rood Machine. Plaintiffs then transferred the proceeds from the loan to Todd
Rood, the owner of Rood Machine. However, less than a month after the transaction closed, Plaintiffs
discovered that Todd Rood had defrauded them with inaccurate and incomplete financial
information.
From January through March of 2016, Plaintiffs communicated with UCB regarding the
fraud. They requested UCB report Rood’s fraud to the Small Business Association in order to freeze
Rood’s assets (including the proceeds from the sale of Rood Machine to Plaintiffs). During this same
period, UCB represented to Plaintiffs that it would report the fraud to the SBA. However, UCB never
reported the fraud to the SBA, and as a result Rood’s assets were never frozen. On December 6,
2017, Rood pled guilty to federal charges of providing false information in connection with an SBA
loan. As part of the judgment in the criminal case, the court ordered Rood to pay restitution of
$1,085,608.49 to UCB, which Rood has paid. 2

1

Eric Allenspach serves as President and Marianne Allenspach-Boller serves as Secretary of Reliable Machine.

2

UCB claims only a fraction of this amount has been paid. For purposes of resolving the pending motion, the Court
accepts Plaintiffs’ claim that the entire amount has been paid.

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II.

Claim Waivers 3
On July 5, 2016, months after Plaintiffs became aware of the fraud, Plaintiffs entered into a

“Change in Terms Agreement” with UCB 4 (“2016 Agreement”). The 2016 Agreement includes the
following language which UCB alleges operates as a claim waiver:
Borrower waives and releases Lender from any and all claims which Borrower may
have against Lender, its agents and assigns, with respect to the Existing Indebtedness,
the note, and the other loan documents executed in connection therewith, whether
such claims are known or unknown, or arise under contract or in tort.
(Doc. 50-1 p. 2). The 2016 Agreement also states “prior to signing this agreement, Borrower read
and understood all of the provisions of this agreement. Borrower agrees to the terms of this
agreement.” Id. An attached addendum to the 2016 Agreement states:
Borrower confirms, reaffirms and ratifies Borrower's respective obligations
contained in the Note and the Loan Documents and represents that Borrower has no
claims, defenses, counterclaims or rights of setoff or recoupment against Lender
under the Note or the Loan Documents or otherwise and hereby waive any such
claims, defenses, counterclaims or rights of setoff or recoupment.
(Doc. 50-1 p. 2). Plaintiff Eric Allenspach signed the Change in Terms Agreement as President of
Reliable Machine. The 2016 Agreement also incorporates an attached “Consent to Change in Terms
Agreement.” As guarantors of the loan, Eric Allenspach and Marianne Allenspach-Boller each
signed this consent three times. The consent states:
To induce Lender to enter into this Modification, each Guarantor . . . waives and
releases and forever discharges Lender and its officers, directors, attorneys, agents,
and employees from any liability, damage, claim, loss or expense of any kind that it
may have against Lender of any kind. Guarantor further agrees to indemnify and hold
Lender and its officers, directors, attorneys, agents and employees harmless from any
loss, damage, judgment, liability or expense (including attorneys' fees) suffered by or
rendered against Lender or any of them on account of any claims arising out of or
3

Though Plaintiffs did not mention the claim waivers in their complaint, the Court may consider them in deciding this
motion to dismiss. See Zean v. Fairview Health Servs., 858 F.3d 520, 526 (8th Cir. 2017).
4

The Change in Terms Agreement released certain real property as collateral and substituted real property located in
Plattsburg, Missouri.

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relating to the obligations of Guarantor . . . to Lender. Each Guarantor . . . further
states that it has carefully read the foregoing release and indemnity, knows the
contents thereof and grants the same as its own free act and deed.
(Doc. 50-1 p. 5).
Nearly nine months later, on March 23, 2017, Plaintiffs and Defendant UCB entered into a
“Modification of Promissory Note” (“March 2017 Modification”). Under this modification, UCB
agreed that Reliable Machine would make no payments on the note for three months. In exchange,
Plaintiffs agreed that:
Each of Borrower and the undersigned guarantor(s) . . . hereby absolutely,
unconditionally and irrevocably releases, remises and forever discharges the Lender
and its successors and assigns, and its present and former shareholders, affiliates,
subsidiaries, divisions predecessors, directors, officers, attorneys, employees, agents
and other representatives (the Lender and all such other Persons being hereinafter
referred to as the “Releasees,” and individually as a “Releasee”), of and from any and
all demands, actions, causes of action, suits, controversies, sums of money, accounts,
bills, reckonings, damages and any and all other claims, counterclaims, defenses,
rights of set off, demands and liabilities whatsoever . . . of every name and nature,
known or unknown, suspected or unsuspected, both at law and in equity, which such
Loan Party or any of its successors, assigns or other legal representatives may now
or hereafter own, hold, have or claim to have against the Releasees or any of them
for upon or by reason of any circumstance, action, cause or thing whatsoever which
arises at any time on or prior to the date that this Modification is executed by all
parties, in each case solely for or on account of or relating to the Note, any of the
other loan, collateral, guaranty or other agreements, instruments or documents
relating thereto or the transactions thereunder or related thereto.
(Doc. 50-2 ¶ 7(a)). Eric Allenspach and Marianne Allenspach-Boller each signed this agreement in
their capacities as officers of Reliable Machine and as guarantors.
On July 1, 2017, four days before payments on the note were scheduled to resume, Plaintiffs
and Defendant UCB entered into another “Modification of Promissory Note” (“July 2017
Modification”). The second modification postponed payments on the note for an additional three
months (until October 4, 2017), and contained the same claim waiver as the prior modification. Eric
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Allenspach and Marianne Allenspach-Boller each signed the agreement in their capacities as officers
of Reliable Machine and as guarantors (Doc. 50-3).
On September 10, 2018, Plaintiffs and Defendant UCB entered into a “Forbearance
Agreement” (“2018 Forbearance”).

The 2018 Forbearance noted that Rood’s fraud induced

Plaintiffs’ decision to take out the loan. Under the agreement, UCB agreed to “forbear from any
further action relating to the Loan Documents” for six months so that Plaintiffs, Defendant UCB,
and the SBA could work together to submit an Offer in Compromise to the SBA to in order to write
down the principal balance on the loan (Doc. 50-4 ¶ G). The 2018 Forbearance defines “Obligors”
as Plaintiffs, “Lender” as Defendant UCB, “Seller” as Todd Rood, and the “Agreement” as the 2018
Forbearance (Doc. 50-4 p. 2). In Paragraph 5(b), the 2018 Forbearance states:
5.(b). Waiver. It is the express intention and agreement of the Parties hereto that
neither the modification of the Loan Documents nor any other documents executed
in connection with the Loan, or any change to the terms thereof as provided herein,
if any, is intended nor shall be construed as an extinguishment, revocation,
satisfaction or discharge of any of the liabilities or obligations therefor. The
execution of this Agreement by the Lender shall not be deemed to be a waiver of its
rights under any Loan Documents or any other agreement, note . . . or other document
on the part of the Lender in exercising any right nor shall it operate as a waiver of
such right or any other rights. . . As additional consideration Obligors and Lender
agree that nothing in this Agreement constitutes a waiver of any claims or defenses
arising from or related to the fraudulent acts of Seller.
(Doc. 50-4¶ 5(b)). Paragraph 10 of the 2018 Forbearance includes a waiver of claims arising from
the 2018 Forbearance:
10. Release. Expressly contingent and conditioned upon, and in consideration for,
the Obligors’ receipt of the Forbearance Period . . . Obligors . . . do hereby release,
remise, quitclaim and forever discharge Lender and its affiliates, along with their . . .
agents, employees . . . from any and all claims . . . whether arising at law, in equity,
by statute, regulation or otherwise, whether known or unknown, suspected or
unsuspected, foreseen or unforeseen, actual or potential, that the Releasors or any of
them, have or may have against the Releasees . . . relating to this agreement, except
as may arise pursuant to the enforcement of this Agreement; however, said release is
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limited to the extent it is impacted by the change of circumstances created by Seller’s
fraud and it is expressly understood and agreed that new defenses may now exist
because of the fraud occurring and ongoing at the time of the execution of the Loan
Documents and said release shall not apply to any defenses arising from or related to
the fraudulent acts taken by Seller.
(Doc. 50-4 ¶ 10) (emphasis added). Marianne Allenspach-Boller signed in her capacity as an officer
of Reliable Machine and as a guarantor, while Eric Allenspach signed as guarantor.
Procedural History
In 2019, Plaintiffs filed suit against UCB and Defendants Foster and Kephart (“individual
defendants”), employees of UCB. The Amended Complaint (Doc. 41) asserts eight counts. Counts
One and Two claim UCB fraudulently and negligently misrepresented that it would scrutinize Rood
Machine’s financials prior to approving the loan. Count Three alleges UCB negligently failed to
comply with SBA underwriting guidelines. Count Four alleges UCB and the individual defendants
negligently misrepresented that they would report Rood’s fraud to the SBA. Count Five alleges UCB
and the individual defendants were negligent in failing to report the fraud to the SBA. Count Six
alleges UCB and the individual defendants breached a fiduciary duty to Plaintiffs by failing to report
Rood’s fraud to the SBA. Count Seven alleges negligent infliction of emotional distress against
UCB. Count Eight seeks a declaratory judgment against UCB, arguing the restitution award
contained in Rood’s criminal judgment satisfies plaintiffs’ balance on their loan from UCB, thereby
releasing Plaintiffs from any liability under the note.
Defendants UCB and the individual defendants subsequently brought this motion to dismiss,
arguing that Plaintiffs waived their claims. The Court stayed this case pending its ruling on the
motion.
Standard
After the pleadings have closed, a party may move for judgment on the pleadings. Fed. R.
Civ. P. 12(c). In ruling on a motion for judgment on the pleadings, the court must “accept as true all
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factual allegations set out in the complaint and construe the complaint in the light most favorable to
the plaintiff, drawing all inferences in [her] favor.” Ashley Cnty., Ark. v. Pfizer, Inc., 552 F.3d
659, 665 (8th Cir. 2009) (internal quotation marks and citation omitted).
A motion under 12(c) that challenges the sufficiency of the pleadings requires the Court to
apply the 12(b)(6) standards. Ashley Cnty., Ark., 552 F.3d at 665. To survive a 12(b)(6) motion to
dismiss, the complaint must do more than recite the bare elements of a cause of action. Ashcroft v.
Iqbal, 556 U.S. 662, 687 (2009). Rather, it must include “enough facts to state a claim to relief that
is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “While a complaint
. . . does not need detailed factual allegations,” a plaintiff must provide the grounds of his entitlement
with more than mere “labels and conclusions,” or “a formulaic recitation of the elements of a cause
of action.” Benton v. Merrill Lynch & Co., Inc., 524 F.3d 866, 870 (8th Cir. 2008) (quoting Twombly,
550 U.S. at 555 (internal citations omitted)). Much like the court’s review under Rule 12(b)(6),
“[j]udgment on the pleadings is appropriate only when there is no dispute as to any material facts and
the moving party is entitled to judgment as a matter of law.” Ashley Cnty., Ark.., 552 F.3d at 665
(internal quotation marks and citation omitted).
To decide a 12(c) motion “the court generally must ignore materials outside the pleadings,
but it may consider some materials that are part of the public record or do not contradict the
complaint, as well as materials that are necessarily embraced by the pleadings.” Porous Media
Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (internal quotation marks and citations
omitted). Matters necessarily embraced by the pleadings include “matters incorporated by reference
or integral to the claim, items subject to judicial notice, matters of public record, orders, items
appearing in the record of the case, and exhibits attached to the complaint whose authenticity is
unquestioned.” Zean v. Fairview Health Servs., 858 F.3d 520, 526 (8th Cir. 2017) (quoting Miller v.
Redwood Toxicology Lab, Inc., 688 F.3d 928, 931 n.3 (8th Cir. 2012)). In cases involving contracts,
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these materials include the contract documents regardless of whether the plaintiff attached these
documents to the complaint. Id. at 526–27.
Discussion
Defendants argue Plaintiffs waived all their claims by signing the claim waivers in the
various loan modification documents. Plaintiffs respond they have not waived their claims because
they alleged they signed the waivers under duress. Plaintiffs also argue that the 2018 Forbearance
revived claims which had been waived in the three prior waivers. Finally, Plaintiffs argue that their
claim for declaratory judgment either falls beyond the scope of the waivers or that public policy
concerns require the Court to hold the claim waivers unenforceable as to the declaratory judgment
claim. The Court addresses each of these claims below.
I.

The Court ignores the Amended Complaint’s legal conclusion that Plaintiffs
signed the claim waivers under duress.

Plaintiffs argue judgment on the pleadings is inappropriate because Plaintiffs’ pleadings
allege they signed the claim waivers under duress. Plaintiffs argue that, since the Court must accept
all factual allegations by the non-moving party as true, the Court cannot determine whether
Defendants are entitled to judgment as a matter of law on the basis of the claim waivers. Plaintiffs
argue the motion for judgment on the pleadings should be denied, or in the alternative, the Court
should convert the motion to a motion for summary judgment. See Fed. R. Civ. P. 12 (d). In either
scenario, the stay would be lifted, allowing Plaintiffs to conduct discovery regarding whether they
signed the claim waivers under duress.
The Court disagrees. In deciding a motion for judgment on the pleadings, the Court must
accept all factual allegations as true. Ashley Cnty., Ark., 552 F.3d at 665. However, it may set aside
any unsupported legal conclusions. Jackson v. Prof'l Radiology Inc., 864 F.3d 463, 466 (6th Cir.
2017); Foster Cable Servs., Inc. v. Deville, 368 F. Supp. 3d 1265, 1270 (W.D. Ark. 2019) (citing
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Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (ruling on a 12 (b) (6) motion)).
Plaintiffs have alleged no facts indicating they signed the claim waivers under duress.
Plaintiffs did not even mention the existence of the claim waivers in their Amended Complaint, let
alone make any factual allegations which, if taken as true, could indicate duress. Plaintiffs only state,
in an affirmative defense to Defendant’s counterclaims:
5. Any amendments to the terms of the Loan Documents were the result of duress
and/or undue influence on the part of UCB. Moreover, any jury or claim waiver is
void and of no effect because UCB has unclean hands, breached its obligations of
good faith and fair dealing, and because the agreements containing amendments were
rescinded and/or repudiated.
(Doc. 60 p. 10). This is an unsupported legal conclusion, and the Court sets it aside for purposes of
deciding this motion.
II.

Plaintiffs waived their claims in Counts One through Seven.

Plaintiffs do not dispute that the 2016 Agreement, the March 2017 Modification, and the July
2017 Modification each contain language which unambiguously waives Counts One through Seven.
However, Plaintiffs argue that language in the 2018 Forbearance operates to “carve out” their claims
from the prior waivers. The 2018 Forbearance does not carve out these claims from the prior waivers,
and the Court therefore holds Plaintiff waived Counts One through Seven.
Missouri law governs the interpretation of the 2018 Forbearance. “In a diversity action, a
district court sitting in Missouri follows Missouri's choice-of-law rules to determine applicable state
law.” Stricker v. Union Planters Bank, N.A., 436 F.3d 875, 877 (8th Cir. 2006). Under Missouri
choice-of-law rules, choice of law provisions within a contract govern a court’s interpretation thereof.
State ex rel. McKeage v. Cordonnier, 357 S.W.3d 597, 600 (Mo. 2012). The 2018 Forbearance
includes a choice of law provision granting the holder of the agreement—which is UCB—the option
to apply either the law of Georgia or “the law of the state or states where the collateral is located”
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(Doc. 50-4 ¶ 14(e)). The collateral includes real property located in Missouri, and UCB elects
Missouri law to govern the interpretation of the 2018 Forbearance.
The 2018 Forbearance does not affect the claim waivers in the three prior agreements. “[T]he
primary rule of contract interpretation is that courts seek to determine the parties’ intent and give
effect to it.” Chochorowski v. Home Depot U.S.A., 404 S.W.3d 220, 226–27 (Mo. 2013) (citations
omitted). “The parties’ intent is presumed to be expressed by the plain and ordinary meaning of the
language of the contract.” Id. “When the language of a contract is clear and unambiguous, the intent
of the parties will be gathered from the contract alone.” Id. The 2018 Forbearance unambiguously
states that it does not affect Defendants’ rights under the 2016 Agreement, the March 2017
Modification, or the July 2017 Modification:
5.(b). Waiver. . . . The execution of [the 2018 Forbearance] by the Lender shall not
be deemed to be a waiver of its rights under any Loan Documents or any other
agreement, note . . . or other document on the part of the Lender in exercising any right
nor shall it operate as a waiver of such right or any other rights.
(Doc. 50-4 ¶ 5(b)). Paragraph 5(b) concludes: “As additional consideration Obligors and Lender
agree that nothing in [the 2018 Forbearance] constitutes a waiver of any claims or defenses arising
from or related to the fraudulent acts of Seller.”
Plaintiffs argue the final sentence of Paragraph 5(b) operates to exempt Plaintiffs’ claims from
the prior claim waivers because Plaintiffs’ claims arise from and are related to Rood’s fraudulent acts.
However, the sentence makes no mention of the claim waivers contained in the prior agreements,
much less state that the claim waivers are no longer valid. Plaintiffs’ interpretation of the last sentence
does not work because it would introduce a contradiction into Paragraph 5(b). Under Plaintiffs’
reading, the paragraph would state in one sentence that the 2018 Forbearance does not constitute a
waiver of Defendants’ rights—including the claim waivers in the prior agreements—and state in
another that the claim waivers in the prior agreements are no longer effective. The Court cannot read
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the contract this way. See Trustees of Clayton Terrace Subdivision v. 6 Clayton Terrace, LLC, 585
S.W.3d 269, 280 (Mo. 2019) (“[C]ourts give the words of the contract their ‘natural, ordinary, and
common sense meaning.’”) (quoting Wilshire Const. Co. v. Union Elec. Co., 463 S.W.2d 903, 906
(Mo. 1971)). Paragraph 5(b) does not modify the claim waivers contained in the three prior
agreements.
Plaintiffs also argue that the 2018 Forbearance carves out their claims because the release
included in paragraph 10 does not apply to “any defenses arising from or related to the fraudulent
acts taken by [Rood]” (Doc. 50-4 ¶ 10). However, this release only applies to claims which arise
from the 2018 Forbearance. Id. (“Obligors . . . do hereby release Lender and its affiliates, along with
their . . . agents, employees . . . from any and all claims . . . relating to this agreement, except as may
arise pursuant to the enforcement of this Agreement.”) (emphasis added). Paragraph 10 does not
modify the claim waivers contained in the three prior agreements.
Plaintiffs waived the claims in Counts One through Seven.
III.

The Court takes Defendants’ Motion under Advisement regarding Count Eight.

Finally, Plaintiffs argue they did not waive Count Eight, the declaratory judgment claim.
Plaintiffs allege “upon information and belief, the Restitution Award in favor of UCB which was
contained in the Criminal Judgment [against Todd Rood] is of an amount sufficient to pay off the
balance of the Loan” and seek a declaratory judgment deeming their debt to UCB satisfied on this
basis (Doc. 41 p. 15). 5 Plaintiffs’ appear to argue that the declaratory judgment claim is beyond the
scope of the claim waivers and that the claim cannot be waived as a matter of public policy.
Whether or not Plaintiffs are correct, the Court would still have to resolve the underlying

5

The Court accepts the allegation for the purpose of a judgment on the pleadings. However, the Court also notes that
UCB alleges Todd Rood has paid only a fraction of what he owes. The Court wishes to remind Plaintiffs’ Counsel that
Rule 11 requires factual contentions in pleadings either have evidentiary support or, if made upon information and belief,
be likely to have evidentiary support “after a reasonable opportunity for further investigation or discovery.” Fed. R. Civ.
P. 11.

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issue here at some point, namely, whether UCB can receive what would arguably be a double
recovery if Todd Rood paid any restitution and the Court entered a judgment requiring Plaintiffs to
pay the entire amount of the loan without regard to any restitution UCB received from him.
Accordingly, the Court will take Defendants’ motion under advisement with regards to Count Eight. 6
The stay in this case is lifted, and Plaintiff may engage in very limited discovery for the sole purpose
of determining what restitution, if any, Todd Rood has paid to UCB, nothing else. 7
Conclusion
Defendants’ motion is GRANTED IN PART. Because Plaintiffs waived the claims brought
in Counts One through Seven, the Court enters judgment in Defendants’ favor on Plaintiffs’ Counts
One through Seven. The motion for judgment on the pleadings is taken under advisement with
respect to Plaintiffs’ Count Eight. Additionally, the Court lifts the stay it previously imposed.
Plaintiff may engage in the limited discovery discussed above. 8
The parties shall confer on a revised scheduling order and submit a proposed revised
scheduling order on or before November 30, 2020.
IT IS SO ORDERED.
Date: November 16, 2020

/s/ Greg Kays
GREG KAYS, JUDGE
UNITED STATES DISTRICT COURT

6

Plaintiffs brought Count Eight as a declaratory judgment claim, seeking the Court declare the note fully satisfied.
Discovery will be useful for determining how much of Plaintiffs’ debt to UCB has arguably been repaid by Todd Rood’s
restitution payments.

7

The Court suspects this discovery can be completed via an interrogatory and a request for production of documents.

8
Defendants may engage in discovery necessary to support their counterclaims, subject to the limitations in the Federal
Rules of Civil Procedure, the Local Rules, and the Court’s Scheduling and Trial Order.

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