Fountain Leasing, LLC v. Kloeber (TV3)

Filing 39

MEMORANDUM AND OPINION re: 24 Motion for Summary Judgment - Signed by Chief District Judge Thomas A Varlan on 5/28/2014. (KMK, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
FOUNTAIN LEASING, LLC,
Plaintiff,
v.
DAVID N. KLOEBER, JR.,
Defendant.

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No.:

3:12-CV-317-TAV-HBG

MEMORANDUM OPINION
This civil matter is before the Court on plaintiff Fountain Leasing, LLC’s Motion
for Summary Judgment [Doc. 24], in which plaintiff seeks summary judgment on its
claims pertaining to the guaranty agreements entered into by defendant David N.
Kloeber, Jr. Defendant submitted a response opposing the motion and making a request
for additional discovery [Doc. 26], to which plaintiff submitted a reply [Doc. 27].1 Upon
review of the arguments of the parties, and in light of the relevant case law, plaintiff’s
motion [Doc. 24] will be granted.
I.

Background
In 2008 and 2009, plaintiff entered into two separate equipment lease agreements

with Montie’s Resources, LLC (“Montie’s”) [Doc. 1-1] for the purchase of two
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On May 22, 2014, defendant submitted a motion to file a supplemental response in
opposition to the pending motion [Doc. 34]. Upon review of the motion as well as the proposed
document [Doc. 34-4], the Court will DENY defendant’s request. Even if the Court were to
consider the arguments set forth in the supplemental brief, the Court would reach the same
conclusion in granting plaintiff’s motion for summary judgment.

bulldozers. The first lease agreement, dated November 6, 2008, provides for the lease by
Montie’s of a “Cat D10N Dozer – SN:2YD1201/7T-2630” [Id. at 8].

The second

agreement, dated February 20, 2009, provides for the lease by Montie’s of a “92 Cat
D10N [D]ozer w/ multi shank ripper – SN:2YD00335” [Id. at 1]. Defendant, who had an
interest in the business of Montie’s, signed two “Continuing Guaranty of Lease”
agreements with plaintiff in relation to the two bulldozer leases [Id. at 6, 12],
guaranteeing to be held liable for Montie’s liability on the leases if Montie’s failed to
make payments.

Montie’s subsequently defaulted under the terms of the lease

agreements and filed for bankruptcy, as did Mr. Bart Montanari, the principal for
Montie’s who carried out the lease transactions and was responsible for purchasing the
bulldozers. When plaintiff attempted to collect the defaulted payments from defendant,
as the guarantor, defendant refused to make such payments, prompting the filing of this
lawsuit. In its complaint [Doc. 1], plaintiff seeks recovery on the defaulted amounts in
the leases per the guaranty agreements, prejudgment interest, and attorney fees [Id.].2
II.

Standard of Review
Summary judgment under Rule 56 of the Federal Rules of Civil Procedure is

proper “if the movant shows 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). The

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In his response/counter-complaint defendant alleged counterclaims against defendant
for breach of contract, misrepresentation, and negligence based on the alleged conduct of Mr.
Montanari in altering the purchase price of the 2008 bulldozer [Doc. 3]. Upon motion by
plaintiff [Doc. 5], however, these counterclaims were dismissed by the Court in a Memorandum
Opinion & Order entered August 28, 2013 [Doc. 13], so that only plaintiff’s claims remain
before the Court.
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moving party bears the burden of establishing that no genuine issues of material fact
exist. Celotex Corp. v. Catrett, 477 U.S. 317, 330 n.2 (1986); Moore v. Phillip Morris
Cos., Inc., 8 F.3d 335, 339 (6th Cir. 1993). All facts and all inferences to be drawn
therefrom must be viewed in the light most favorable to the non-moving party.
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986);
Burchett v. Kiefer, 301 F.3d 937, 942 (6th Cir. 2002).
“Once the moving party presents evidence sufficient to support a motion under
Rule 56, the nonmoving party is not entitled to a trial merely on the basis of allegations.”
Curtis Through Curtis v. Universal Match Corp., 778 F. Supp. 1421, 1423 (E.D. Tenn.
1991) (citing Celotex, 477 U.S. at 317). To establish a genuine issue as to the existence
of a particular element, the non-moving party must point to evidence in the record upon
which a reasonable finder of fact could find in its favor. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). The genuine issue must also be material; that is, it must
involve facts that might affect the outcome of the suit under the governing law. Id.
The Court’s function at the point of summary judgment is limited to determining
whether sufficient evidence has been presented to make the issue of fact a proper
question for the factfinder. Anderson, 477 U.S. at 250. The Court does not weigh the
evidence or determine the truth of the matter. Id. at 249. Nor does the Court search the
record “to establish that it is bereft of a genuine issue of material fact.” Street v. J.C.
Bradford & Co., 886 F.2d 1472, 1479–80 (6th Cir. 1989). Thus, “the inquiry performed
is the threshold inquiry of determining whether there is a need for a trial—whether, in
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other words, there are any genuine factual issues that properly can be resolved only by a
finder of fact because they may reasonably be resolved in favor of either party.”
Anderson, 477 U.S. at 250.
III.

Analysis
Plaintiff moves for summary judgment based on its argument that defendant

cannot create a genuine issue of material fact as to his liability under the guaranty
agreements. In support of this position, plaintiff relies upon defendant’s admission that
the leases are in default and that no payment has been made, while also relying upon the
language of the guaranty agreements attached to the complaint [Doc. 1-1]. As to the
amounts owed under the lease, prejudgment interest, late fees, and attorney fees, plaintiff
submitted the affidavit of Mr. Lee Iglehart, the Vice-President of Fountain Leasing, LLC,
illustrating the amounts owed as of the date of the filing of plaintiff’s motion [Doc. 24-1].
In response, defendant first argues that the Court’s ruling on the motion should be
delayed until discovery is completed. Specifically, defendant submits that he requires
discovery of the relevant documentation and records underlying the lease transactions at
issue, as well as any communications between plaintiff and Mr. Montanari or Montie’s
regarding the leases. In addition, defendant submits that he wishes to depose several of
plaintiff’s employees regarding the lease transactions. As to the merits of plaintiff’s
claims, defendant argues that there is a genuine issue of material fact as to whether there
was an enforceable contract, based upon the parties’ intent, as well as to the existence and
amount of plaintiff’s damages.
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A.

Request for Discovery

When a summary judgment motion is filed, the party opposing the motion may, by
affidavit under Rule 56(d) (formerly Rule 56(f)), explain why he or she is unable to
present facts essential to justify the party’s opposition to the motion. See Wallin v.
Norman, 317 F.3d 558, 564 (6th Cir. 2003). The Rule provides in pertinent part:
(d) When Facts Are Unavailable to the Nonmovant.
If a nonmovant shows by affidavit or declaration that,
for specified reasons, it cannot present facts essential to
justify its position, the court may:
(1) defer considering the motion or deny it;
(2) allow time to obtain affidavits or declarations or
to take discovery; or
(3) issue any other appropriate order.
Fed. R. Civ. P. 56(d). “Before ruling on summary judgment motions, a district judge
must afford the parties adequate time for discovery, in light of the circumstances of the
case.” Plott v. Gen. Motors Corp., 71 F.3d 1190, 1195 (6th Cir. 1995). However, the
party seeking the additional discovery bears the burden of “demonstrat[ing] why such
discovery is necessary.” Summers v. Leis, 368 F.3d 881, 887 (6th Cir. 2004). Bare
allegations or vague assertions of the need for additional time for discovery are not
enough. United States v. Cantrell, 92 F. Supp. 2d 704, 717 (S.D. Ohio 2000) (citing
Lewis v. ACB Bus. Serv., Inc., 135 F.3d 389, 409 (6th Cir. 1998)). The nonmoving party
“must show how postponement of a ruling on the motion will enable him to rebut the
motion for summary judgment.” Lyons v. Ray, No. 5:05-405-JMH, 2007 WL 679005, at
*4 (E.D. Ky. March 1, 2007) (quoting Lewis v. ACB Bus. Serv., Inc., 135 F.3d 389, 409
(6th Cir. 1998)).
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Assuming that defendant’s request, along with the affidavit of his counsel, would
otherwise be sufficient for this Court to defer ruling on plaintiff’s motion, the Court finds
that good cause does not exist to defer its ruling at this time. Defendant’s response
containing its request for deferral pending discovery [Doc. 26] was filed December 18,
2013.

On March 25, 2014, the parties submitted a Joint Status Report [Doc. 29],

indicating that discovery had been completed. Defendant has not shown that additional
time is necessary or that there is any additional discovery to be taken at this time.
Accordingly, defendant’s request for a deferred ruling and/or additional discovery is
denied as moot, and the Court will consider the merits of the parties’ arguments based on
the record before it.
B.

Defendant’s Liability under the Guaranty Agreements

As this action involves a dispute over a guaranty agreement, the Court first notes
that guaranties on commercial leases or loans “are special contracts under Tennessee
law.” Suntrust Bank v. Dorrough, 59 S.W.3d 153, 156 (Tenn. Ct. App. 2001). “In order
to facilitate the extension of credit, Tennessee does not favor guarantors and will construe
a guaranty against the guarantor as strongly as the language will permit.” Id. (citing
Squibb v. Smith, 948 S.W.2d 752, 755 (Tenn. Ct. App. 1997)). In any contract, the
elements for breach under Tennessee law include (1) the existence of a contract, (2)
breach of the contract, and (3) damages which flow from the breach.” Life Care Ctrs. of
Am. v. Charles Town Assocs. L.P., 79 F.3d 496, 514 (6th Cir. 1996). As to the existence
of a contract, and the terms of the parties’ agreement, “[t]he cardinal rule of contract
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interpretation is that the court must attempt to ascertain and give effect to the intention of
the parties.”

Simonton v. Huff, 60 S.W.3d 820, 825 (Tenn. Ct. App. 2000).

In

ascertaining intent, “the court must examine the language of the contract, giving each
word its usual, natural, and ordinary meaning.” Id. (citing Wilson v. Moore, 929 S.W.2d
367, 373 (Tenn. Ct. App. 1996)).

“Where the language in a contract is clear and

unambiguous, then its literal meaning controls the outcome of a contract dispute, and the
court may not look beyond the four corners of the contract to ascertain the parties’
intention.” Cummings Inc. v. Dorgan, 320 S.W.3d 316, 333 (Tenn. Ct. App. 2009).
In this case, each of the guaranty agreements indicates the terms of the lease as
being for 48 months at a rate of $3,353.00 per month for the November 2008 bulldozer
lease and $6,586.25 per month for the February 2009 bulldozer lease, respectively [Doc.
1-1 at 6, 12]. Each agreement then states that defendant, as guarantor:
hereby guarantee[s]to Lessor, its successors, and assigns, the prompt and
unconditional payment of any obligation or liability of Lessee to Lessor,
it[s] successors or assigns, under this lease including but not limited to any
and all sums, late charges, disbursements, expenses, legal fees, and any
deficiency upon enforcement of collateral deposited or otherwise, if any, in
connection with all such obligations.
[Id.]. The agreement also states that the guarantor agrees that the lessee’s, that is,
Montie’s obligations, may be “modified, prematured, released, settled, or compromised”
by plaintiff, and that any security held by plaintiff, that is, the bulldozers, could be
“exchanged, sold, released, or surrendered by it, as may deem advisable, without
impairing or affecting the obligation of Guarantor hereunder” [Id.].

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Defendant has not alleged or presented any evidence that this language contains
any ambiguity or that the terms are confusing or otherwise unclear. Rather, defendant
states in his affidavit that his intention was to only “finance the actual cost of the
Bulldozer,” [Doc. 26-1 ¶ 5], apparently referring to the 2008 lease for the first bulldozer,
which the Court interprets as meaning that defendant only intended to be liable for the
actual price of the bulldozer.3 This statement, however, contradicts the plain language of
the guaranty agreement indicating the amount for which defendant would be liable and
indicating that defendant guaranteed “the prompt and unconditional payment of an
obligation or liability” [Doc. 1-1 at 12], including late charges, legal fees, and deficiency
from any sale.

The language of the contract contains no language indicating that

defendant intended to limit his liability to the actual value of the bulldozer, and does not
discuss the value of the bulldozer as bearing any connection to defendant’s payment
obligation as the guarantor. In addition, the guaranty agreement states that defendant
would be obligated even in the event of the disposition of the bulldozer itself, further
undermining defendant’s contention that he only intended to be responsible for the
market value of the bulldozer. Accordingly, and in light of the plain language of the
guaranty agreement, the Court finds that the statements contained within defendant’s
affidavit have not created a genuine issue of material fact as to his liability under the
terms of the guaranty agreements. See Jadco Enters., Inc. v. Fannon, --- F. Supp. 2d ---,
2014 WL 66521, *7 (E.D. Ky. Jan. 8, 2014) (citing Devine v. Jefferson Cnty., 186 F.
Supp. 2d 742, 744 (W.D. Ky. 2001)) (noting that self-serving affidavits cannot create
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Defendant admits, however, that he personally guaranteed $275,000 to plaintiff [Id.].
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genuine issue of material fact); see also Allen v. Ohio Dep’t of Job & Family Servs., 697
F. Supp. 2d 854, 891 (S.D. Ohio 2010) (citing Butts v. Aurora Health Care, Inc., 387
F.3d 921, 925 (7th Cir. 2004) (noting that self-serving affidavits without factual support
in the record carry no weight on summary judgment)).4
The Court reaches the same conclusion with respect to defendant’s arguments
regarding the existence of damages, the third element for a breach of contract claim.
Defendant argues that there is a question of fact as to whether plaintiff is entitled to
damages based on the allegations that plaintiff permitted Montie’s to continue using the
equipment after it filed for bankruptcy and delayed the sale of the bulldozers, obtaining
less value than could have been obtained through an earlier sale. Assuming that plaintiff
permitted Montie’s to possess the bulldozers after default and delayed their sale, the
Court finds these facts to be immaterial to the question of whether plaintiff is entitled to
the amounts owed under the guaranty agreements. As previously discussed, defendant
agreed that the bulldozers could be “exchanged, sold, released, or surrendered . . . without
impairing or affecting” defendant’s obligations under the guaranty agreement [Doc. 1-1
at ¶ 6]. Defendant’s attempt to add a requirement of mitigation is contrary to the

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Although not explicitly presented as a defense in his brief, to the extent that defendant
argues the guaranty contract is unenforceable because it was obtained as a result of fraud on the
part of Mr. Montanari, the Court notes that defendant has presented no evidence connecting
plaintiff with any fraudulent conduct on the part of Montie’s or Mr. Montanari to support this
defense. Similarly, to the extent defendant has argued that the breach of contract was the result
of plaintiff’s own breach of contract or negligence, the Court notes that it has previously ruled on
these issues in its Memorandum Opinion & Order dismissing defendant’s counterclaims [Doc.
13] and finds that there is no genuine issue of material fact as to their availability as a defense to
plaintiff’s claims under the guaranty contracts at issue.
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language of the agreement and is insufficient to preclude summary judgment being
entered in plaintiff’s favor, particularly in light of the fact that guaranty agreements are to
be construed against the guarantor. See Squibb, 948 S.W.2d at 755. The agreement
indicates that the bulldozers could be disposed for little or no value without affecting
defendant’s obligations to pay in the event of default. Plaintiff’s damages in this case,
then, are based on the unpaid amounts under the leases per the guaranty agreements,
regardless of the value of the bulldozers as collateral. In addition, while plaintiff argues
that he expects to learn about the nature of the agreements between plaintiff and Montie’s
and the underlying documentation, plaintiff has presented no evidence in this regard
which would create a genuine issue of material fact as to defendant’s liability. Thus, the
Court finds there is no triable issue as to whether plaintiff is entitled to the amounts set
forth under the guaranty agreements.
Accordingly, the Court concludes that there is no genuine issue of material fact as
to plaintiff’s claims and plaintiff is entitled to summary judgment on defendant’s
obligations under the guaranty agreements. As to the precise amount of damages, the
Court finds it appropriate for plaintiff to submit a motion and proposed order of judgment
with respect to the final amounts owed by defendant.
IV.

Conclusion
For the reasons previously discussed, and in light of the arguments of the parties

as well as the prevailing case law, plaintiff’s Motion for Summary Judgment [Doc. 24]

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will be GRANTED and judgment will be entered in plaintiff’s favor, pending submission
by plaintiff of the final amounts owed under the guaranty agreements.
ORDER ACCORDINGLY

s/ Thomas A. Varlan
CHIEF UNITED STATES DISTRICT JUDGE

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