Opinion
NO. 2019-CA-000211-MR
01-10-2020
ALBERTA DAVIES APPELLANT v. MARK CONWAY APPELLEE
BRIEF FOR APPELLANT: Patrick H. Watson Paris, Kentucky BRIEF FOR APPELLEE: Andre F. Regard Lexington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM BOURBON CIRCUIT COURT
HONORABLE BRIAN PRIVETT, JUDGE
ACTION NO. 18-CI-00066 OPINION
AFFIRMING
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BEFORE: JONES, LAMBERT AND L. THOMPSON, JUDGES. THOMPSON, L., JUDGE: Alberta Davies ("Appellant") appeals from an order of the Bourbon Circuit Court granting summary judgment in favor of Mark Conway ("Appellee") in the amount of $161,157.24 plus interest and attorney fees. Appellant argues that the circuit court erred in applying the Uniform Commercial Code ("UCC") to a loan agreement between the parties and in failing to grant summary judgment in her favor following the transfer of collateral to Appellee. For the reasons addressed below, we find no error and AFFIRM the order on appeal.
FACTS AND PROCEDURAL HISTORY
On March 23, 2018, Appellee filed a complaint against Appellant in Bourbon Circuit Court seeking a judgment arising from the breach of a loan agreement with Appellant. Appellee asserted that on August 25, 2017, he entered into a loan agreement with Appellant, the terms of which provided for a $66,000 loan from Appellee to Appellant for a term of six months. Appellant pledged as collateral for the loan "the full ownership of a yearling filly by Bodemeister out of the mare Starship Flare[.]" The agreement specified interest accruing at the rate of 8% if paid in full by September 31, 2017, and 6% thereafter. Other language addressed legal fees, if any, plus transportation and other costs.
The plaintiffs included Conway Racing, LLC and On the Mark Racing, Inc., which are not parties to this appeal.
We will refer to this yearling filly as The Filly.
In addition to the claim of breach of the loan agreement, Appellee's complaint set out causes of action related to his purchase from Appellant of a 30% ownership interest in the racing filly Tu Se Manques and the failed pregnancy and alleged poor care of the broodmare Lotta Distinction. The resolution of these claims was not appealed and they are not now before us.
These claims were asserted by Conway Racing, LLC and On the Mark Racing, Inc. --------
On March 23, 2018, the circuit court entered an order granting Appellee's motion for a writ of possession. The writ allowed Appellee to take possession of The Filly and Tu Se Manques. The following month, Appellant answered the complaint with a general denial. Appellee then moved for an order authorizing the sale of The Filly, and Appellant moved for an order amending the March 23, 2018 order granting the writ of possession.
A hearing on the motions was conducted on May 1, 2018, after which the court entered an order on May 11, 2018, granting Appellee's motion to authorize the sale of The Filly and denying Appellant's motion to amend the March 23, 2018 order. The court determined that the UCC Article 9, as adopted in Kentucky Revised Statutes ("KRS") Chapter 355, applied to the loan at issue because the loan created a security interest in The Filly as defined by the UCC. The court found that an auction of The Filly conducted by the Bourbon County Master Commissioner met the commercially reasonable disposition requirements set out in the UCC and concluded that if the sale of The Filly did not satisfy the loan amount, Appellant was liable for the deficiency. Five days later, Appellant filed a pleading styled "Response" in which she argued that the "purported" loan agreement had no business purpose, that the UCC did not apply, and that the transfer of The Filly to Appellee satisfied her obligation in full.
On December 28, 2018, Appellee moved for summary judgment as to the breach of the loan agreement. He argued that there was no dispute as to the terms of the loan, that Appellant failed to make any payments thereon, and that there was no issue as to Appellant's responsibility for any deficiency resulting from the sale of the collateral. Appellee calculated this deficiency at $161,157.24, minus $1 for Appellee's credit as sole bidder at the sale of The Filly. In support thereof, Appellee tendered Appellant's answers to interrogatories acknowledging having made no payments on the loan.
On January 8, 2019, the Bourbon Circuit Court entered an order which forms the basis of the instant appeal. The court granted Appellee's motion for summary judgment, awarding a judgment in favor of Appellee in the amount of $161,157.24 as of December 28, 2018, plus any additional late fees and interest accruing at the rate of 6%. The court went on to award attorney fees in the amount of $15,787.75, plus any additional attorney fees incurred by Appellee after December 28, 2018. This appeal followed.
ARGUMENTS AND ANALYSIS
Appellant first argues that the Bourbon Circuit Court committed reversible error in sustaining Appellee's motion for summary judgment. She argues that the circuit court erred in applying provisions of the UCC, as set out in KRS Chapter 355, because the loan agreement does not fall within the scope of the UCC. Appellant also directs our attention to KRS 355.9-109(1)(a) and KRS 355.1-201(2)(ai) in support of her contention that the UCC is limited in its application and should not be applied to the collateral at issue. Finally, Appellant asserts that the plain language of the loan agreement states that she was not obligated to repay the loan to Appellee.
We are not persuaded that the Bourbon Circuit Court erred in applying UCC Article 9 (KRS 355.9-101) in the present instance. KRS 355.9-109(1)(a) states that, "Except as otherwise provided . . . this article applies to . . . [a] transaction, regardless of its form, that creates a security interest in personal property . . . by contract[.]" The circuit court determined that the loan agreement was a contract which, by its terms, created a security interest in The Filly. This conclusion is supported by the record. The face of the loan agreement states that it is a "contract" that is binding on both parties, with Appellant pledging "the full ownership of a yearling filly by Bodemeister out of the mare Starship Flare as collateral. Transfer of collateral will occur if payment in full is not made by the end of the term of this agreement." Appellant has cited no statutory law or case law in opposition to the circuit court's conclusion. The circuit court properly applied UCC Article 9, including its disposition of The Filly as collateral upon Appellant's acknowledged nonpayment.
We are also not persuaded by Appellant's claim that she was not required to repay the loan. The agreement is styled by the signatories as a "Loan Agreement" which characterized Appellant as "Borrower," with the purpose of the agreement being a "loan." While it states that Appellant "may make as many or as few payments as desired," it also provided that the "term of this loan is 6 months. On March 1, 2018 if the loan principal is not paid in full, the Lender will have the right to take possession of the collateral pledged by the Borrower." Again, the Bourbon Circuit Court determined that the loan agreement evinced Appellant's duty to repay the loan according to its terms, and this conclusion is supported by the record.
Lastly, Appellant argues that the Bourbon Circuit Court erred in failing to order summary judgment in her favor after Appellee took possession of The Filly on March 29, 2018. Appellant's motion sought to preclude any further recovery by Appellee under the terms of the loan agreement. KRS 355.9-615(4)(b), however, provides that, "[t]he obligor is liable for any deficiency." The Bourbon Circuit Court determined that the transfer of the collateral to Appellee did not satisfy Appellant's repayment obligation and accordingly denied her motion for summary judgment. Summary judgment in favor of Appellant would have been warranted only if it appeared impossible that Appellee could have produced evidence warranting a judgment in his favor. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). The record did not support the conclusion that it was impossible for Appellee to produce evidence warranting a judgment in his favor and, as such, the motion for summary judgment in favor of Appellant was properly denied. We find no error.
CONCLUSION
For the foregoing reasons, we AFFIRM the order of the Bourbon Circuit Court granting summary judgment in favor of Appellee.
ALL CONCUR. BRIEF FOR APPELLANT: Patrick H. Watson
Paris, Kentucky BRIEF FOR APPELLEE: Andre F. Regard
Lexington, Kentucky