US Bank NA v. Sierra Building Products et al
Filing
30
MEMORANDUM DECISION granting 18 Motion for Summary Judgment; denying 25 Motion to Strike; granting 28 Motion for Joinder. Signed by Judge Ted Stewart on 02/16/2012. (tls)
IN THE UNITED STATES COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
U.S. BANK, N.A., a National Banking
Association;
Plaintiff,
MEMORANDUM DECISION AND
ORDER GRANTING PLAINTIFF’S
MOTION FOR SUMMARY
JUDGMENT AND DENYING
MOTION TO STRIKE
vs.
SIERRA BUILDING PRODUCTS, INC., a
Utah corporation; KYLE WELLS, an
individual; JASON WELLS, an individual;
AND CODY WEBBER, an individual;
Case No. 2:11-CV-458 TS
Defendants.
This matter is before the Court on Plaintiff U.S. Bank, N.A.’s Motion for Summary
Judgment on the Defense of Offset Asserted by Defendant Kyle Wells and for the Entry of Final
Judgment.1 Also before the Court is Plaintiff’s Motion to Strike Declaration of Kyle Wells2 and
Defendants Sierra Building Products, Inc. (“Sierra”), Cody Webber, Jason Wells, and Jeremiah
1
Docket No. 18.
2
Docket No. 25.
1
Wilson’s Motion for Joinder in Memorandum in Opposition to U.S. Bank N.A.’s Motion to
Strike Declaration of Kyle Wells.3 For the reasons discussed more fully below, the Court will
grant Plaintiff’s Motion for Summary Judgment and Defendants’ Motion for Joinder and will
deny Plaintiff’s Motion to Strike.
I. BACKGROUND
This is a breach of contract case brought against Sierra for failure to abide by the terms of
a loan agreement. Defendants Kyle Wells, Jason Wells, Jeremiah Wilson, and Cody Webber are
included in the suit for failure to fulfill their obligations as guarantors for Sierra.
On or about August 6, 2008, Sierra entered into a loan agreement with Plaintiff (the
“Sierra loan”) whereby Plaintiff agreed to loan Sierra $250,000. On or about the same date,
Defendant Kyle Wells (“Defendant Wells”) entered into a Continuing Guaranty, pursuant to
which he agreed to secure the full payment and performance of any and all obligations owed by
Sierra to Plaintiff.4 This Continuing Guaranty acted as security to the Sierra loan. On or about
August 26, 2009, Defendants Jason Wells, Jeremiah Wilson, and Cody Webber also entered into
Continuing Guaranty agreements whereby each similarly committed to secure the full payment
and performance of any and all obligation owed by Sierra to Plaintiff—including the Sierra loan.5
3
Docket No. 28.
4
See Docket No. 19 Ex. C.
5
See id. Exs. E, F, G.
2
Defendant Wells and the other guarantors to the Sierra loan do not dispute that Sierra has
defaulted under the terms of the Sierra loan agreement. Indeed, each of the defendant guarantors
have stipulated:
that each Defendant is jointly and severally liable under the Continuing Guaranty
agreements signed by each of the above-identified Defendants for the failure of
Sierra Building Products, Inc. to make the monthly payments promised under the
applicable Loan Agreement, Note, Security Agreement, and Amendment to Loan
Agreement and Note. Defendants, Kyle Wells, Jason Wells, Jeremiah Wilson,
and Cody Webber further agree that they have each failed to perform as promised
under the terms of the Continuing Guaranty agreements. Thus, the only issues
reserved for discovery, and possible trial, relate to the measure and amount of
damages, or any affirmative defenses raised by the Defendants which would
negate, eliminate, or otherwise limit the damages resulting from said Defendants’
stipulation set forth above.6
Defendant Wells asserts that Plaintiff is not entitled to summary judgment because he has
asserted an affirmative defense of offset.7 According to Defendant Wells, the Court should delay
judgment in this case based upon an on-going state court case he is litigating against Plaintiff. In
his declaration, Defendant Wells acknowledges that “[t]he facts and circumstances surrounding
the [s]tate [c]ourt [a]ction have nothing to do with [Sierra].”8 Nonetheless, Defendant Wells
asserts that he does not believe he owes any amount under the terms of the Continuing Guaranty
because the damages he has suffered based on the actions alleged in the state court action are
higher than the amounts allegedly owing in this action.
6
Docket No. 16, at 2-3.
7
In a hail mary attempt to delay judgment, Defendant Wells’s co-defendants have sought
to join in support of his affirmative defense of offset. See Docket Nos. 23, 28.
8
Docket No. 21, at 4.
3
Plaintiff does not dispute the existence of the state court action. Instead, Plaintiff argues
that the plain language of the Continuing Agreement makes clear that Defendant Wells has
waived all rights to assert setoffs or counterclaims. The Continuing Guaranty states, in pertinent
part: “The Guarantor expressly waives all rights of setoff and counterclaims, as well as diligence
in collection or prosecution, presentment, demand of payment or performance, protest, notice of
dishonor, nonpayment or nonperformance of any Obligation.”9
Plaintiff has provided information pertaining to the entry of final judgment in its favor.
Specifically, Plaintiff has provided evidence supporting the amount it alleges is owed under the
Sierra loan, including a principal balance of $206,651.67, interest in the amount of $20,022.36,
and late fees of $1,022.28. Defendants have not disputed these amounts. Plaintiff has also
asserted that interest continues to accrue at an amount of $68.88 per day—a figure similarly
undisputed. Plaintiff also alleges that it has expended $13,574.75 in attorneys’ fees and $545.00
in costs in seeking to recover on the Sierra loan. Plaintiff has provided a detailed breakdown of
its fees and costs. Defendants dispute $200 of Plaintiff’s attorneys’ fees and Plaintiff has
stipulated to reduce its Attorneys’ fees by that amount.
II. STANDARD OF REVIEW
Summary judgment is proper if the moving party can demonstrate that there is no genuine
issue of material fact and it is entitled to judgment as a matter of law.10 In considering whether a
genuine issue of material fact exists, the Court determines whether a reasonable jury could return
9
Docket No. 19 Ex. C, at 1.
10
FED . R. CIV . P. 56(a).
4
a verdict for the nonmoving party in the face of all the evidence presented.11 The Court is
required to construe all facts and reasonable inferences in the light most favorable to the
nonmoving party.12
III. DISCUSSION
A.
OFFSET
As outlined above, Plaintiff moves for summary judgment on Defendant Wells’s defense
of offset on the grounds that Defendant Wells expressly waived any and all right to assert an
offset or other counterclaim defense in the Continuing Guaranty agreement. Defendant Wells
contends that the Continuing Guaranty does not bar his affirmative defense of offset and genuine
issues of material fact exist as to the validity of his offset defense.
As a preliminary matter, the Continuing Guaranty contains a choice of law provision that
provides that it shall be governed by the laws of the state of Utah.13 In accordance with the terms
of this provision, the Court will apply the laws of the state of Utah in interpreting and applying
the Continuing Guaranty.
In Utah, “[c]ontract construction ‘begins and ends with the language of the contract.’”14
“[A]s the Utah Supreme Court recently explained, the interpreting court must first determine
11
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Clifton v. Craig, 924
F.2d 182, 183 (10th Cir. 1991).
12
See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986);
Wright v. Sw. Bell Tel. Co., 925 F.2d 1288, 1292 (10th Cir. 1991).
13
Docket No. 19 Ex. C, at 2.
14
United States v. Dunn, 557 F.3d 1165, 1172 (10th Cir. 2009) (quoting Daines v.
Vincent, 190 P.3d 1269, 1277 (Utah 2008)).
5
whether the contract’s language is ambiguous.”15 “A contract term is ambiguous ‘if it is capable
of more than one reasonable interpretation because of uncertain meanings of terms, missing
terms, or other facial deficiencies.’”16 “This is a question of law for the court to decide without
reference to parol evidence.”17 “When the parties offer opposing interpretations that are
reasonably supported by the contract’s language, the court should consider extrinsic evidence that
supports the parties’ interpretations of the contract.”18 “In contrast, when the contract language is
not susceptible to contrary interpretations, the contract is not ambiguous, and its plain meaning
should be enforced.”19
Here, the parties’ dispute centers on section 3 of the Continuing Guaranty. That section is
titled “Waivers” and states in pertinent part: “The Guarantor expressly waives all rights of setoff
and counterclaims, as well as diligence in collection or prosecution, presentment, demand of
payment or performance, protest, notice of dishonor, nonpayment or nonperformance of any
Obligation.”20
15
Id. (citing Daines, 190 P.3d at 1275-76).
16
Id. (quoting Daines, 190 P.3d at 1275).
17
Id. (citing Daines, 190 P.3d at 1276).
18
Id. (citing Daines, 190 P.3d at 1275-76).
19
Id. (citing Daines, 190 P.3d at 1277).
20
Docket No. 19 Ex. C, at 1.
6
Plaintiff asserts that, through this provision, Defendant Wells has waived all rights to
offset any recovery in this action against his state court action.21 Further, Plaintiff argues that this
provision provides that Defendant Wells has waived all right to raise counterclaims in this action.
Defendant Wells contends that, when read in conjunction with the defined term “Obligation,”
this clause is limited only to those liabilities and obligations that may exist related to the Sierra
loan.22
Defendant Wells’s interpretation of the Continuing Guaranty waiver provision is not
supported by the plain language of the agreement. The waiver provision clearly provides that the
guarantor—Defendant Wells—expressly waives all rights of setoff and counterclaims. The
provision then states that Defendant Wells also waives various other claims a guarantor may, in
the normal course of litigation, pursue against a guarantee or creditor. The mere placement of the
defined term “Obligation” at the end of the sentence does not modify Defendant Wells’s express
waiver to rights of setoff and counterclaims.
21
Under Utah law the term offset is freely interchangeable with, and has the same
meaning as, the term setoff. See Bailey-Allen Co., Inc. v. Kurzet, 945 P.2d 180, 192 (Utah Ct.
App. 1997).
22
“Obligation” is defined in the Continuing Guaranty as “all loans, drafts, overdrafts,
checks, notes and all other debts, liabilities and obligations of every kind owing by the Borrower
(Sierra) to the Bank (Plaintiff), whether existing now or in the future, including interest thereon
and all costs, expenses and reasonable attorneys’ fees (including fees of inside counsel) paid or
incurred by the Bank at any time before or after judgment in attempting to collect any of the
foregoing or this Guaranty, and to enforce this Guaranty, whether such costs, expenses or fees are
incurred before or after commencement of litigation or at trial, on appeal, or in any other
proceeding.” Docket No. 19 Ex. C, at 1.
7
In sum, the Court finds that the plain meaning of the Continuing Guaranty waiver
provision is unambiguous and bars Defendant Wells, as the guarantor, from raising a setoff
defense or other counterclaim. As such, the Court will grant Plaintiff’s Motion for Summary
Judgment on the Defense of Offset asserted by Defendant Wells.
B.
ENTRY OF FINAL JUDGMENT
Defendant Wells and Defendants Jason Wells, Jeremiah Wilson, and Cody Webber
previously stipulated and agreed that each has breached, and is jointly and severally liable under,
the Continuing Guaranty agreements. Further, the Court has found, based on the language of the
Continuing Guaranty, that Defendant Wells’s affirmative defense of offset fails as a matter of
law. Thus, the only remaining issue is the measure and amount of damages to which Plaintiff is
entitled.
Apart from disputing that damages are altogether not due because of Defendant Wells’s
right to an offset, Defendants have not raised any other dispute with regard to the damages
alleged by Plaintiff.23
Plaintiff has presented evidence that, due to the Defendants’ breach of the terms of the
Sierra loan, it has suffered the following damages: (1) $206,651.67 in unpaid principal loan
balance under the Sierra loan; (2) $20,022.36 in unpaid interest on the Sierra loan;24 (3)
23
As mentioned previously, Defendant Wells does dispute a $200 charge within Plaintiff’s
alleged attorneys’ fees. Plaintiff has stipulated to remove this charge. Therefore the Court will
reduce Plaintiff’s attorneys’ fees award by $200.
24
As stated previously Plaintiff asserts—and Defendants do not dispute—that interest
continues to accrue at an amount of $68.88 per day. Such prejudgment interest will continue
through the day judgment is entered.
8
$1,022.28 for late fees on the Sierra loan; (4) $13,374.75 in attorneys’ fees; and (5) $545.00 in
costs. As Defendants do not dispute these amounts, the Court will enter judgment in Plaintiff’s
favor for the amounts provided above.
C.
MOTION TO STRIKE
Plaintiff moves the Court to strike the declaration of Defendant Wells on the grounds that
it contains inadmissible parol evidence and is otherwise inadmissible as irrelevant under the
Federal Rule of Evidence 401. The parol evidence rule bars the use of extrinsic evidence to vary
or add to the terms of a contract where the contract is valid, integrated, and unambiguous.25
In the instant case, the majority of Defendant Wells’s declaration presents information
with regard to his affirmative defense of offset. The Court ultimately found that this defense is
precluded under the Continuing Guaranty. However, in opposing summary judgment, Defendant
Wells properly provided evidence of the state court action in support of his offset defense. For
this reason, the Court finds that Defendant Wells’s declaration does not violate the parol
evidence rule and is relevant under Federal Rule of Evidence 401.26 Therefore, the Court will
deny Plaintiff’s Motion to Strike the declaration of Defendant Wells.
25
Tangren Family Trust v. Tangren, 182 P.3d 326, 332 (Utah 2008).
26
Rule 401 provides that “Evidence is relevant if (a) it has any tendency to make a fact
more or less probable than it would be without the evidence; and (b) the fact is of consequence in
determining the action.”
9
IV. CONCLUSION
It is therefore
ORDERED that Plaintiff’s Motion for Summary Judgment on the Defense of Offset
Asserted by Defendant Kyle Wells and for the Entry of Final Judgment (Docket No. 18) is
GRANTED. It is further
ORDERED that Plaintiff’s Motion to Strike Declaration of Kyle Wells (Docket No. 25) is
DENIED. It is further
ORDERED that Defendants Sierra, Cody Webber, Jason Wells, and Jeremiah Wilson’s
Motion for Joinder in Memorandum in Opposition to U.S. Bank N.A.’s Motion to Strike
Declaration of Kyle Wells (Docket No. 28) is GRANTED. The Clerk of Court is directed to
enter judgment in favor of Plaintiff and against Defendants pursuant to this Order and to close
this case forthwith.
DATED February 16, 2012.
BY THE COURT:
__________________________
TED STEWART
United States District Judge
10
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?