Opinion
NO. 2014-CA-002082-MR
01-20-2017
BARREN RIVER WATERFRONT DEVELOPMENT, INC.; MIKE BARTLETT; AND STACY BARTLETT APPELLANTS v. SOUTH CENTRAL BANK, INC. F/K/A SOUTH CENTRAL BANK OF BARREN COUNTY INC.; AND NARROWS MARINA, LLC APPELLEES
BRIEFS FOR APPELLANTS: B. Alan Simpson Bowling Green, Kentucky BRIEFS FOR APPELLEE SOUTH CENTRAL BANK, INC.: Charles E. English David W. Anderson Bowling Green, Kentucky BRIEFS FOR APPELLEE NARROWS MARINA, LLC: S. Frank Smith, Jr. Bowling Green, Kentucky
NOT TO BE PUBLISHED APPEAL FROM BARREN CIRCUIT COURT
HONORABLE PHIL PATTON, JUDGE
ACTION NO. 12-CI-00337 OPINION
AFFIRMING
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BEFORE: ACREE, J. LAMBERT AND TAYLOR, JUDGES. ACREE, JUDGE: Appellants Barren River Waterfront Development, Inc., Stacy Bartlett, and Mike Bartlett appeal from the June 24, 2014, order of the Barren Circuit Court granting summary judgment in favor of Appellee, The Narrows Marina, LLC. We affirm.
FACTS AND PROCEDURE
In 2006, Barren River obtained a loan secured by a promissory note from Narrows Marina's co-appellee, South Central Bank. The note contained a default provision which accelerated all amounts owed upon any event of default.
To ensure repayment of the loan, the Bank obtained a security interest in "all inventory, accounts, equipment, general intangibles, and fixtures" related to Barren River's marina business, and in a certain 1993 Mercury Stardust Cruiser (house boat). Stacy and Mike separately executed commercial guaranty agreements wherein they absolutely and unconditionally guaranteed full and punctual payment and satisfaction of the debt owed by Barren River to the Bank.
The Bartletts, through Barren River, had been operating the "Narrows" marina on the Barren River Reservoir for almost 20 years, pursuant to a lease with the U.S. Army Corps of Engineers. The lease expired on December 31, 2012.
Barren River defaulted on the note. The Bank sued Barren River and Stacy and Mike to collect the balance of the note, interest, and attorney's fees under the terms of note and the guaranty agreements.
The Bank claimed default occurred when Barren River failed or refused to make installment payments when due.
To avoid a judicial sale, Stacy and Mike extensively negotiated with Wayne Shelton and William Funk for the sale of the marina. Shelton and Funk ultimately formed Narrows Marina. Appellants tentatively agreed to sell the marina to Narrows Marina for $650,000.00. The circuit court approved the sale by Agreed Judgment entered December 17, 2012. It also ordered that, if the sale of the marina was not consummated before December 31, 2012, the marina, along with all inventory, accounts, equipment, general intangibles and fixtures pertaining thereto, were to be immediately relinquished to the Bank for disposition.
The sale did not occur by the deadline. Appellants failed or refused to surrender the collateral. On January 7, 2013, in response to a motion by the Bank, the circuit court entered summary judgment and an order of possession and sale in favor of the Bank. The court ordered Appellants to turn over all collateral to the Bank and authorized the Bank to dispose of the property at a public or private sale in a commercially reasonable manner.
On January 15, 2013, the Bank filed a motion seeking an order approving the sale of the collateral, excluding the house boat, to Narrows Marina for $360,000.00. Affixed to the motion was the affidavit of Joe Houchens, a licensed auctioneer and real estate broker. Houchens declared that he had made numerous personal inspections of the marina and, during an inspection on January 15, 2013, it was discovered that the condition of the marina was in a more deteriorated state than previously disclosed.
A hearing was held on January 18, 2013, at which Houchens testified consistent with his affidavit. The circuit court issued an order that day authorizing the "sale of the [m]arina," excepting the house boat, at the commercially reasonable price of $360,000.00 and upon the terms set forth in an "Offer of Purchase" dated January 14, 2013, from Narrows Marina to the Bank. The Offer of Purchase identified the collateral subject to the sale, including items allegedly removed from the premises by Mike:
[Narrows Marina] agrees to purchase from [the Bank] the Assets which are the items shown in Exhibit "A", which is a series of photographs numbered A-1 thru A-10, and some which are now located on two (2) trailers near or on the property of D-Best Storage and one beside the road, and such items on the grounds of, but outside a building near Finney close to the "Dam Store", and the winches and miscellaneous locate[d] in the storage buildings at D Best Storage; and all structures, buildings, facilities, floats and walkways as shown on Exhibit "B".(R. at 187-88). The Offer of Purchase also contained a self-designated "Insurance: Risk of Loss" clause:
Such assets include all structures and facilities which existed during the operation of the Marina known as The Narrows on Barren River Lake, Kentucky.
Such items include all walkways, bridges, buildings, encased floats, winches, perlings, [sic] dock frames, posts all of which may or may not presently be located at the marina site and which at one time were located at the marina and the winches located in storage building on D-Best property.
No motorized vehicles or watercraft, except one john boat without a motor is a part of the purchase. A 1983 Stardust houseboat is specifically not included in this purchase.
Upon the execution of this Agreement, [Narrows Marina] may, but is not required to, obtain insurance on its insurable interest and the existing insurance shall remain in effect until closing and in the event of a covered loss, the insurance shall apply to the purchase price, or in the event any loss or damage to the Assets exceeds twenty percent (20%) of the value of the assets, [Narrows Marina] may cancel and otherwise void this Purchase
Agreement. [Narrows Marina] shall be the sole owner of any proceeds of insurance obtained by [Narrows Marina].(R. at 191).
The proceeds of the sale were to be applied: (i) first to the costs of this action, including attorney's fees; (ii) second to the amount previously adjudged for the Bank; with (iii) any remaining proceeds to be held by the Bank for disposition under further orders of the court.
Closing of the sale occurred on March 8, 2013. The Bank executed a Bill of Sale, and was paid $360,000.00, a small portion of which remained upon satisfaction of all debts. The Bank moved to seek an order of the circuit court on the dispersal of these remaining funds. After the initial motion was filed, the Bank learned that, on or about January 30, 2013, after the contract to sell the marina had been formed, the marina was damaged by a storm. Travelers Insurance Company issued a check to the Bank for $89,149.72. The check indicates that it is for loss that occurred on January 30, 2013. The Bank filed supplemental motions apprising the court of this development. Therein, the Bank represented:
The Bill of Sale included an "Addendum A" which described in detail the items subject to the sale. (R. at 281).
The parties make mention of a second insurance check marginally at play in this case. In spring 2013, the Bank received a check in the amount of $85,196.10 from Proctor Financial, Inc. representing a refund of premiums on a policy of insurance that the Bank had attempted to purchase to cover the marina when Barren River failed to do so in direct violation of its written agreement with the Bank. The premium paid by the Bank had been added to the debt owed by Barren River, as authorized by the loan documents. Proctor Financial subsequently discovered that the paid-for policy specifically excluded docks and wharves, and refunded the portion of the premiums paid for these items. Barren River asked that the refunded premiums be returned to it. The circuit court ultimately agreed in an order entered on September 10, 2013. No further mention of these insurance proceeds is needed.
The Travelers insurance policy is a blanket policy maintained by [the Bank] that provides many different forms of coverage. None of the premiums for the Travelers insurance policy were charged to the [Appellants]. The Travelers insurance policy covered only [the Bank's] insurance interest in the Marina, not the interest of the [Appellants] or the interest of [Narrows Marina].(R. at 276).
Narrows Marina filed an intervening complaint to protect its interest in the insurance proceeds. Appellants answered and counterclaimed that Narrows Marina had unlawfully converted some of their personal property located at the marina that was not security for the loan from the Bank.
On June 6, 2014, Narrows Marina moved for summary judgment, with two affidavits, claiming entitlement to the Travelers' insurance proceeds. Appellants responded in opposition with counter-affidavits. On June 24, 2014, the circuit court granted summary judgment in favor of Narrows Marina, awarding it the proceeds of the Travelers insurance policy. Appellants filed a CR 59.05 motion to alter, amend, or vacate that ruling.
Kentucky Rules of Civil Procedure.
On October 29, 2014, while awaiting the circuit court's decision, Narrows Marina served requests for admissions to the Bank; the Bank filed a sworn response that stated in pertinent part:
The insurance proceeds in the amount of $89,149.72 were received from Travelers Insurance Company pursuant to a blanket insurance policy [the Bank] purchased and which provided coverage for damage to all collateral in which [the Bank] had an interest in
connection with all the loans [the Bank] had outstanding. The only insured under said policy was [the Bank] and only [the Bank's] interest was insured by said policy. . . .(R. at 397-98).
[The Bank] paid all of the premiums for the insurance policy issued by Travelers Insurance Company from which the proceeds in the amount of $89,149.72 were paid. The premiums on said policy were not, either in whole or in part, paid by or charged to Barren River or the Bartletts [Stacy and Mike].
The circuit court overruled Appellants' post-judgment motion. This appeal followed.
STANDARD OF REVIEW
"The standard of review on appeal of summary judgment is whether the trial court correctly found there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." Carter v. Smith, 366 S.W.3d 414, 419 (Ky. 2012). Summary judgment involves only legal questions and the existence, or non-existence, of material facts are considered. Stathers v. Garrard County Bd. of Educ., 405 S.W.3d 473, 478 (Ky. App. 2012). Our review is de novo. Mitchell v. University of Kentucky, 366 S.W.3d 895, 898 (Ky. 2012).
ANALYSIS
Appellants claim they, not Narrows Marina, are entitled to the Travelers' insurance proceeds and that genuine issues of material fact exist precluding summary judgment. Specifically, they assert there is no definitive evidence in the record as to when the storm damage occurred creating a significant factual dispute, as ownership of the collateral did not vest in Narrows Marina until closing on March 8, 2013. Their argument is flawed.
We will assume for purposes of this appeal, and as supported by the record, that two storms caused damage to the marina: the first storm prior to January 18, 2013 and the second storm on January 30, 2013. These factual assumptions do not afford Appellants the relief they seek.
First, the insurance check from Travelers specifically states it is for loss that occurred on January 30, 2013. Even if a prior storm damaged the marina, these insurance proceeds do not pertain to or cover that loss. Appellants attempt to create a genuine issue of fact where none exists.
Second, the Travelers' policy covered all property in which the Bank held a security interest. The policy only pertained to the Bank's insurable interest, and was in place solely to protect the interests of the Bank. The policy did not cover Appellants' insurable interest. The premiums were not charged to Barren River or to Stacy and Mike. These facts are uncontroverted. The Appellants' affidavits attached to their response to Narrows Marina's summary judgment motion do not challenge or alter these facts. We fail to see how Appellants are entitled to proceeds from an insurance policy the premiums for which were paid solely by the Bank, which insured only the Bank's interest, and which identified only the Bank as the beneficiary of the policy. The Bank is the only entity legally entitled to the proceeds. However, under the terms of the Offer to Purchase, the Bank agreed to pay any insurance proceeds to Narrows Marina.
Third, we reject as irrelevant Appellants' argument that the first storm - the one allegedly occurring prior to January 18, 2013 - and any resulting damage from that storm was used to justify lowering the price of the marina from $650,000.00 to $360,000.00. This has no bearing on whether Appellants are entitled to this particular insurance check for a loss occurring on January 30, 2013. If misdeeds were involved in crafting the Offer of Purchase and the $360,000.00 sales price, such evidence should have been fully produced at the January 18, 2013 hearing.
Appellants also claim entitlement to the insurance proceeds because, in their view, the damage occurred while they still owned the marina. They are mistaken. The circuit court gave possession of the marina to the Bank on January 7, 2013, dispossessing Appellants of all possession, ownership, and control. We emphasize that this case involves only personal, not real, property: that is, a floating marina secured with cables, boat slips, floating walkways, a floating dock, and related equipment, assets, and fixtures. Once again, the storm damage which resulted in the insurance proceeds from Travelers occurred on January 30, 2013. Appellants were divested of ownership prior to this date.
In sum, we agree with the circuit court that no genuine issue of material fact exists in this record and that, as a matter of law, Narrows Marina was entitled to the insurance proceeds.
Finally, Appellants argue that the circuit court improperly dismissed their conversion counterclaim against Narrows Marina. The essence of Appellants' conversion counterclaim is that certain personal property that was not security for the Bank's loan was sold to Narrows Marina. Not only is there no indication that a notice of appeal or cross-appeal has been filed relative to such a ruling, we see nothing in the record to indicate that such a ruling was ever rendered. In particular, the June 24, 2014 summary judgment for Narrows Marina does not mention it. Appellants have not cited the record where such a ruling can be found. We are convinced none exists.
The circuit court's failure to rule on Appellants' counterclaim does not divest this Court of jurisdiction to hear this appeal. The January 24, 2014 order fully resolved Narrows Marina's claim against Appellants related to the insurance proceeds and was made final by the inclusion of proper CR 54.02 recitations. See CR 54.02(1); Spencer v. Estate of Spencer, 313 S.W.3d 534, 540 (Ky. 2010) (explaining CR 54.02(1) allows for "an appeal in a multi-claim action" but only when the judgment recites "both that the judgment is 'final' and that 'there is no just reason for delay.'" (Citation omitted)). --------
This Court is one of review. Fischer v. Fischer, 348 S.W.3d 582, 589 (Ky. 2011). For that reason, a trial court must "first be given the opportunity to rule on questions before they are available for appellate review." Elwell v. Stone, 799 S.W.2d 46, 48 (Ky. App. 1990) (quoting Massie v. Persson, 726 S.W.2d 448, 452 (Ky. App. 1987)). Absent a decision from the circuit court as to this conversion counterclaim, there is nothing for this Court to review. Florman v. MEBCO Ltd. Partnership, 207 S.W.3d 593 (Ky. App. 2006) (quoting Lawrence v. Risen, 598 S.W.2d 474, 476 (Ky. App. 1980)).
Technically, the counterclaim is still alive and subject to disposition. The circuit court's failure to address the conversion counterclaim appears to be a simple oversight.
CONCLUSION
We affirm the Barren Circuit Court's June 24, 2014, order granting summary judgment for Narrows Marina related to insurance proceeds from Travelers Insurance Company.
ALL CONCUR. BRIEFS FOR APPELLANTS: B. Alan Simpson
Bowling Green, Kentucky BRIEFS FOR APPELLEE SOUTH
CENTRAL BANK, INC.: Charles E. English
David W. Anderson
Bowling Green, Kentucky BRIEFS FOR APPELLEE
NARROWS MARINA, LLC: S. Frank Smith, Jr.
Bowling Green, Kentucky