Opinion
NO. 2012-CA-000855-MR
06-14-2013
PHIL WILLIAMS APPELLANT v. AMERICAN EXPRESS BANK, FSB APPELLEE
BRIEFS FOR APPELLANT: Phil Williams, Pro Se Prospect, Kentucky BRIEF FOR APPELLEE: Harold M. Schwarz, III Akron, Ohio
NOT TO BE PUBLISHED
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE BARRY WILLETT, JUDGE
ACTION NO. 09-CI-009627
OPINION
AFFIRMING
BEFORE: CAPERTON, LAMBERT, AND MAZE, JUDGES. CAPERTON, JUDGE: The Appellant, Phil Williams, appeals the April 27, 2012, order of the Jefferson Circuit Court, granting the motion for summary judgment filed by the Appellee, American Express Bank, FSB (hereinafter "Amex"), as to its claim that Williams defaulted upon the credit card agreement between the parties and is indebted to Amex in the amount of $36,814.71, and dismissing Williams's counterclaim for failure to state a claim upon which relief may be granted. Upon review of the record, the arguments of the parties and the applicable law, we affirm.
This matter was initiated by Amex on September 21, 2009, which alleged that Williams obtained $36,814.71 in goods and services on an Amex credit card account, and failed to pay the credit card balance. Williams, as the authorizing officer of Wheel Play, LLC, a Kentucky limited liability company, applied for and was granted an extension of credit by American Express. Williams states that Wheel Play, LLC was established in Kentucky in 2006, and that he was one of three members of the company, which sold custom automobile and truck wheels and tires at two retail locations. Due to a dramatic downturn in business beginning in 2008, Wheel Play ceased operations in 2010.
Williams asserts that the company credit card was embossed with the name, "Wheel Play, LLC", but that his name was also on the credit card. Williams states that the billing statement was in the name of Wheel Play, LLC; that all payments on the credit card were made from the company's bank account; and that all charges made on the Wheel Play, LLC credit card were for business related items and expenses and not for Williams's personal expenses.
Moreover, Williams asserts that in 2008, he was diagnosed with kidney cancer, which resulted in extensive treatment, continuing through the time that his brief was submitted to this Court. Williams argues that the credit card charges which are the subject of Amex's claim against him were incurred during the period of time in which he was being treated for cancer and not present at Wheel Play, LLC.
Amex states that a Cardmember Agreement was sent to Williams with the credit card. The first paragraph of that Agreement stated in pertinent part, "When you keep, sign or use this Business Card issued to you ... or you use the account associated with this Agreement (your "Card Account"), you agree to the terms of this Agreement." The Cardmember Agreement further provided that Williams, as the authorizing officer of Wheel Play, was the basic cardmember and stated, "The Basic Cardmember is the authorizing officer of the Company who authorized us to issue the Business Card to you." As the basic cardmember on the account, Williams promised "to pay all Charges, including Charges incurred by Additional Cardmembers," on the account. Moreover, the Agreement stated:
The Company and the Basic Cardmember are responsible under this Agreement for all use of the Card Account by the Basic Cardmember and Additional Cardmembers, and by anyone else the Basic Cardmember or an Additional Cardmember lets use the Card, and the Charges they incur will be billed to the Basic Cardmember.
Williams used and/or authorized the use of the extension of credit to make various purchases. Amex then sent monthly statements to the address provided by Williams. Williams ultimately defaulted on the Agreement by failing to make timely payments and Amex made a demand for the entire $36,814.71 balance due. Although due demand was made, Williams failed to liquidate the balance due. Amex cancelled the account due to failure to pay, and ultimately filed a complaint with the trial court to collect the balance owed.
Williams answered the complaint, and asserted the following affirmative defenses: (1) failure to join indispensable parties; (2) lack of and failure of consideration; and (3) lack of an enforceable or valid guarantee. In his answer, Williams conceded that: (1) Amex extended credit under an account number ending in 61009; (2) not all amounts due for the credit advanced under the account ending in 61009 have been paid; and (3) Amex has demanded payment and has not been paid the amount demanded.
Below, Williams argued that although he was a member of Wheel Play, LLC, he was not liable for the amount owed on the company's business credit card. According to Williams, the company ceased active operations in 2010 due to a significant decline in business. Though he acknowledges that there were debts on the company's business credit card, Williams argues that he never assumed individual liability on the account. Further, Williams argues that Amex's claims against him should be dismissed because Amex never filed a certificate of authority with the Kentucky Secretary of State.
Williams also filed what he described as a "counterclaim," in which he asserted that he had been damaged by alleged agreements between Amex and certain unidentified merchants that purportedly required them to pay full price, rather than a discounted price, for certain merchandise. Williams claimed that "contractual provisions" between Amex and the unidentified third-party merchants were "inequitable, against public policy, and ... in violation of federal and state law."
As noted, Amex filed a motion for summary judgment, and Williams filed a motion to dismiss in response. Therein, he argued that Amex had not registered as a foreign corporation, and was therefore barred from maintaining any proceeding in a court of this Commonwealth pursuant to Kentucky Revised Statutes (KRS) 14A.9-020. The court disagreed, finding that Amex was not required to file a certificate of authority because it is a savings association to be regulated by the Office of the Comptroller of the Currency and does not meet the definition of "foreign entity," as defined by KRS 14A.1-070(10).
The court granted the motion for summary judgment filed by Amex finding that Williams had conceded that Wheel Play, LLC entered into the credit card agreement with Amex, and that his arguments against individual liability for the debts on the card were without merit because: (1) The statute of frauds did not apply and, therefore, Williams's use of the card constituted his assent to the terms of the Agreement; and (2) By using the card, Williams agreed to be individually liable, and was not a guarantor under the Agreement, but was instead primarily responsible for the debt incurred. It is from that order that Williams now appeals to this Court.
As his first basis for appeal, Williams argues that American Express had no legal basis to hold him individually liable for the debts and obligations of a limited liability company. Williams argues that KRS 275.150(1) specifically indicates that a member of a Kentucky limited liability company is immune from personal liability for debts of the Company absent an agreement to the contrary. That provision provides that:
(1) Except as provided in subsection (2) of this section or as otherwise specifically set forth in other sections in this chapter, no member, manager, employee, or agent of a limited liability company, including a professional limited liability company, shall be personally liable by reason of being a member, manager, employee, or agent of the limited liability company, under a judgment, decree, or order of a court, agency, or tribunal of any type, or in any other manner, in this or any other state, or on any other basis, for a debt, obligation, or liability of the limited liability company, whether arising in contract, tort, or otherwise. The status of a person as a member, manager, employee, or agent of a limited liability company, including a professional limited liability company, shall not subject the person to personal liability for the acts or omissions, including any negligence, wrongful act, or actionable misconduct, of any other member, manager, agent, or employee of the limited liability company. That a limited liability company has a single member or a single manager is not a basis for setting aside the rule otherwise recited in this subsection.
(2) Notwithstanding the provisions of subsection (1) of this section, under a written operating agreement or under another written agreement, a member or manager may agree to be obligated personally for any of the debts, obligations, and liabilities of the limited liability company.
(3) Subsection (1) of this section shall not affect the liability of a member, manager, employee, or agent of a limited liability company for his or her own negligence, wrongful acts, or misconduct.
Williams argues that in the situation sub judice, there was no written agreement or contract whereby he personally assumed any responsibility for the debt of a limited liability company, and thus the court erred in granting summary judgment to Amex on its claim.
Secondly, Williams argues that any contractual relationship that existed between him and Amex would be one in which Williams was a guarantor of a company debt, and that the agreement sought to be enforced cannot be a valid guarantee pursuant to KRS 371.065. Williams directs the attention of this Court to KRS 371.065, which states, in relevant part:
No guaranty of an indebtedness which either is not written on, or does not expressly refer to, the instrument or instruments being guaranteed shall be valid or enforceable unless it is in writing signed by the guarantor and contains provisions specifying the amount of the maximum aggregate liability of the guarantor thereunder, and the date on which the guaranty terminates.Williams argues that the guarantee in the Cardmember Agreement at issue sub judice does not state a maximum liability amount and termination date, nor is it written on or expressly referring to the instrument or instruments being guaranteed. Thus, he argues that Amex has no valid legal basis to hold him liable for the debt of Wheel Play.
As his third basis for appeal, Williams argues that there were multiple issues of material fact which precluded the grant of summary judgment in favor of American Express. Specifically, he argues that material issues of fact exist concerning: (1) Whether he ever agreed to the terms and conditions of the Cardmember Agreement, either personally or on behalf of Wheel Play, LLC, as the agreement is unsigned, undated, and makes no reference to either Williams or Wheel Play; and (2) Whether the debt in question is a corporate obligation or an individual obligation as Amex presented no evidence that the card was used by any party other than Wheel Play, LLC. Williams also asserts that because he was not given the opportunity to depose Edmond Garabedian, upon whose affidavit Amex relied in support of its motion, he was prevented from developing other additional issues and material facts which would have prevented the court from properly granting summary judgment in this case. Williams argues that when all facts are considered in the light most favorable to him, the court's decision to grant summary judgment was improper.
As his fourth basis for appeal, Williams argues that Amex cannot maintain a cause of action against him until it complies with Kentucky law relating to foreign corporations. He asserts that at the time this action was instituted, Amex, as a foreign corporation, was required to obtain a certificate of authority from the Kentucky Secretary of State pursuant to KRS 14A.9-020 before it can institute any action in a Kentucky circuit court. Williams asserts that because Amex failed to do so in this instance, the court should not have heard its claim.
As his fifth and final basis of appeal, Williams argues that it was error for the circuit court to dismiss his counterclaim against Amex. Therein, Williams argued that certain agreements mandated by American Express on participating merchants either prevent or restrict the merchant from offering lower prices to individuals, including Williams, who are not using the credit card, even if the cost to the merchant from using a competing credit or debit card is less than the Amex card. Williams argues that these actions by Amex are unfair, deceptive, and act as an illegal restraint of trade, in addition to being prohibited under common law.
In response to the arguments made by Williams, Amex argues that there was ample legal basis for the court below to make its determination that Williams should be held individually liable for the debts and liabilities asserted by Amex. First, Amex asserts that Williams's argument that he may not be held liable under KRS 275.150 was not raised before the trial court, and is therefore waived.
Williams disagrees, and argues that though he may not have specifically cited KRS 275.150 in his arguments, he has argued from the beginning that the debt in question was the responsibility of Wheel Play, LLC, and not his responsibility personally. It is well established in the Commonwealth that the courts will not hold a pro se litigant to the same standard as legal counsel, treating the pro se litigant with leniency. See Commonwealth v. Miller, 416 S.W.2d 358, 360 (Ky.1967), and Case v. Commonwealth, 467 S.W.2d 367, 368 (Ky.1971). Accordingly, we will review Williams's argument concerning the application of KRS 275.150 on the merits.
Alternatively, Amex asserts that under the express terms of the Cardmember Agreement, Williams did not guarantee the debt of Wheel Play, LLC, but was a joint account holder. Moreover, it asserts that Williams's argument that he cannot be held liable for the debt of Wheel Play as he did not execute a written agreement is effectively an argument under the statute of frauds. To that end, it notes that KRS 371.010(9) expressly exempts "agreements pursuant to which credit is extended by means of a credit card or similar device," from the statute of frauds. Thus, Amex argues that no signature requirement exists, and that both Williams and Wheel Play were jointly and severally liable under the terms of the Cardmember Agreement accepted at the time the card was first utilized. Amex also asserts that because it is not a "foreign entity" pursuant to KRS 14A.1-070(10), and because it is a savings association to be regulated by the Office of the Comptroller of the Currency, it was not required to file a certificate of authority before proceeding with its claim against Williams in a Kentucky court. Finally, Amex argues that Williams's counterclaim against it was properly dismissed, as it failed to state a claim upon which relief could be granted.
In reviewing the arguments of the parties, we note that our standard for reviewing a trial court's entry of summary judgment on appeal is well-established and was concisely summarized by this Court in Lewis v. B & R Corp., 56 S.W.3d 432 (Ky. App. 2001):
The standard of review on appeal when a trial court grants a motion for summary judgment is, "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." The trial court must view the evidence in the light most favorable to the non-moving party, and summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence at trial warranting a judgment in his favor. The moving party bears the initial burden of showing that no genuine issue of material fact exists, and then the burden shifts to the party opposing summary judgment to present "at least some affirmative evidence showing that there is a genuine issue of material fact for trial."Id. at 436 (internal footnotes omitted).
Because summary judgments involve no fact-finding, we review the trial court's decision de novo. 3D Enters. Contr. Corp. v. Louisville & Jefferson County Metro. Sewer Dist., 174 S.W.3d 440, 445 (Ky. 2005); Blevins v. Moran, 12 S.W.3d 698, 700 (Ky. App. 2000). We review the arguments of the parties with these standards in mind.
Upon review of the record, the arguments of the parties, and the applicable law, we are ultimately in agreement with the decision of the court below to grant summary judgment in favor of Amex. A review of the record clearly demonstrates that: (1) Williams and Wheel Play, LLC jointly applied for and received a line of credit; (2) That Amex conditioned the use of the line of credit upon the terms of a Cardmember Agreement sent to Williams and Wheel Play, LLC along with the credit card at issue; (3) That Williams and Wheel Play, LLC utilized the line of credit to make purchases; and that (4) Williams and Wheel Play, LLC failed to re-pay Amex. Upon review of the record, and the Cardmember Agreement itself, it is clear that Williams's use of the card constituted his assent to the terms of the Agreement. We are in agreement with the court below that the statute of frauds is not applicable sub judice and, therefore, Williams was not required to sign the agreement but only to use the card to be bound by its terms. See KRS 371.010.
Indeed, the Agreement clearly provided that, "When you keep, sign, or use the Business Card issued to you ... or use the account associated with this Agreement (your 'Card Account'), you agree to the terms of this agreement. The words 'you,' 'your' and 'yours' mean the person named on the Business Card and/or where applicable, the Company." Further, Williams clearly agreed by use of the card to be individually liable, as the Agreement stated, "The Company, Basic Cardmember, and Additional Cardmembers agree, both jointly and individually, to be bound by the terms of this Agreement."
Clearly, Williams and Wheel Play, LLC applied for credit, received a line of credit, and assented to the terms accompanying the line of credit by using the card to make purchases. There is no dispute that Williams and Wheel Play, LLC later defaulted on the obligation to tender repayment and, accordingly, we believe that no genuine issue of material fact exists that would have precluded a grant of summary judgment.
Having so found, we turn to Williams's remaining arguments on appeal. Concerning Williams's argument that KRS 14A.9-020 bars Amex from maintaining an action such as the one sub judice in Kentucky, we disagree. Ultimately, we are in agreement with Amex that Williams's motion to dismiss was untimely, and thus properly denied by the court below. Pursuant to Kentucky Rules of Civil Procedure (CR) 12.01, Williams was required to serve his answer or other response within 20 days after service of summons. Moreover, CR 12.02 requires that all defenses, in law or fact, to a claim for relief in any pleading be asserted in the defendant's answer. Williams answered the complaint of Amex rather than filing a pre-pleading motion to dismiss and, though he identified several affirmative defenses in his answer, did not raise the issue of the application of KRS 14A.0-020 to the matter sub judice.
CR 12.02 provides that:
Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: (a) lack of jurisdiction over the subject matter, (b) lack of jurisdiction over the person, (c) improper venue, (d) insufficiency of process, (e) insufficiency of service of process, (f) failure to state a claim upon which relief can be granted, and (g) failure to join a party under Rule 19. A motion making any of these defenses shall be made before pleading if a further pleading is permitted. No defense or objection is waived by being joined with one or more defenses or objections in a responsive pleading or motion. If a pleading sets forth a claim for relief to which the adverse party is not required to serve a responsive pleading, he may assert at the trial any defense in law or fact to that claim for relief. If, on a motion asserting the defense that the pleading fails to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
Moreover, even if Williams had properly raised this issue below, we are in agreement with the circuit court that Amex was not required to file a certificate of authority pursuant to KRS 14A.9-020, because Amex is not a "foreign entity" as that term is defined by KRS 14A.1-070(10). Amex is a savings association to be regulated by the Office of the Comptroller of the Currency, which is a federal agency. It is well-settled that federal control shields national banks from duplicative state regulation. See Watters v. Wachovia Bank, N.A., 550 U.S. 1, 10, 127 S.Ct. 1559, 1566 (2007). Accordingly, it was not required to file a certificate of authority, and Williams's motion was properly denied.
KRS 14A.070(10) defines a foreign entity as, "A corporation, not-for-profit corporation, cooperative, association, business or statutory trust, partnership, limited partnership, or limited liability company." That provision provides that an entity is foreign if it is "not: (a) organized pursuant to the laws of the Commonwealth of Kentucky; or (b) as to its internal affairs, governed by the laws of the Commonwealth of Kentucky."
Indeed, this Court recently reached a similar result in considering the same argument asserted by Williams in another action initiated by Chase Bank. Therein, we held that a nationally chartered bank is "not required to obtain a certificate of authority before filing ... suit" in Kentucky. See Williams v. Chase Bank U.S.A., N.A., 2010-NA-002034-MR (Ky. App. May 25, 2012). We believe this holding to be applicable to Amex in the situation sub judice, as it is a savings association regulated by the Officer of the Comptroller of the Currency.
Finally, concerning Williams's counterclaim, we find that it was properly dismissed by the court below in light of the fact that it failed to state any cognizable claim upon which relief may have been granted. As best we understand the claim made by Williams, he argues that he was damaged by supposed agreements between Amex and unidentified merchants which allegedly required him to pay full price, rather than a discounted amount for certain merchandise. Williams claimed that these "contractual provisions" between Amex and the unidentified third-party merchants were "inequitable, against public policy, and ... in violation of federal and state law," though he identified no statutory or common law claim that arose from the existence of these alleged contractual provisions. Further, Williams failed to identify the parties to the alleged contracts, where and when the alleged contracts were entered into, and the amount of damage sustained. Accordingly, we are in agreement with the court below that these rather vague allegations failed to state any cognizable claim upon which relief may be granted, and that the claim was therefore properly dismissed. See James v. Wilson, 95 S.W.3d 875 (Ky. App. 2002).
In so finding, we again note that in Williams v. Chase Bank, supra, this Court considered and rejected a counterclaim virtually identical to the one that Williams now asserts herein.
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Ultimately, upon review of the record and for the foregoing reasons, we can find no affirmative evidence offered by Williams which would suggest that there is any material issue of fact requiring trial. Accordingly, we believe that the court below properly granted the motion for summary judgment filed by Amex and properly overruled the motion to dismiss filed by Williams.
Wherefore, for the foregoing reasons, we hereby affirm the April 27, 2012, order of the Jefferson Circuit Court, the Honorable Barry Willett, presiding.
ALL CONCUR. BRIEFS FOR APPELLANT: Phil Williams, Pro Se
Prospect, Kentucky
BRIEF FOR APPELLEE: Harold M. Schwarz, III
Akron, Ohio