COUNTRYSIDE BUILDERS, INC AND GALET DEVELOPMENT CO., INC. v. NATIONAL CITY BANK OF KENTUCKY
Annotate this Case
Download PDF
RENDERED: MAY 12, 2000; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1998-CA-002723-MR
COUNTRYSIDE BUILDERS, INC AND
GALET DEVELOPMENT CO., INC.
APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE F. KENNETH CONLIFFE, JUDGE
ACTION NO. 96-CI-007208
v.
NATIONAL CITY BANK OF KENTUCKY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: GUDGEL, CHIEF JUDGE, GUIDUGLI AND TACKETT JUDGES.
GUIDUGLI, JUDGE:
Countryside Builders, Inc. and Galet
Development Company, Inc. (collectively Countryside) appeal from
a memorandum and order of the Jefferson Circuit Court entered
August 26, 1998 granting summary judgment in favor of National
City Bank of Kentucky (NCB) as to its claim against Countryside
and Countryside’s counterclaim.
We affirm.
FACTS1
1
We have taken the majority of our facts from the deposition
of Thomas Johns (Thomas), Countryside’s president.
Countryside was a corporation engaged in the
development of subdivisions and the construction of new homes.
In late 1994-1995, Countryside began developing cash flow
problems due to a combination of various factors, none of which
are attributable to any conduct or action on behalf of NCB.2
Countryside’s problems continued despite an additional $600,000
credit line extended by NCB in March 1995.
Some of Countryside’s
trade creditors apparently knew about its cash flow problems as
early as the summer of 1995 when Countryside began slowing down
its repayment schedule.
In an effort to remedy its problems
Countryside (a) went to its creditors and negotiated debt
restructuring agreements; (b) began negotiating with PNC Bank
(PNC) to obtain additional credit lines; and (c) ultimately
entered into a forbearance agreement with NCB.
DEBT RESTRUCTURING
In October 1995, Countryside began negotiations with
its trade creditors in regard to debt restructuring.
Under the
terms of each individual agreement, Countryside’s trade creditors
were asked to agree to a 25% debt discount.
The creditors were
told that restructuring would result in a substantial cash flow
increase which would allow Countryside to survive.
All but two
of Countryside’s trade creditors agreed to the restructuring.
Kentucky-Indiana Lumber Company (K&I) was one of
Countryside’s largest creditors.
2
In late October 1995 a meeting
Although Countryside’s tax returns show losses from 19891993, Countryside attributes its ability to show these losses to
its ability to utilize tax loopholes and claims that it was, in
fact, turning a profit until 1994-1995.
-2-
took place in the office of Don Cox (Cox), K&I’s attorney.
According to Thomas, during this meeting Ron Mason (a K&I
employee) stated that Dick Hawkes (a loan officer with NCB)
called Walt Freeman (K&I’s president), advised him that
Countryside was having cash flow problems, and recommended that
K&I file liens to protect itself.
Thomas admitted that K&I never
filed liens as a result of the alleged phone calls and that K&I
agreed to restructure its debt with Countryside.
However, Thomas
alleged that doing business with K&I became more difficult after
the alleged phone calls and that the difficulties did not start
until after the phone calls occurred.
PNC NEGOTIATIONS
Countryside began negotiating for an increase in its
credit line with PNC in the summer of 1995.
Thomas testified
that PNC was advised of Countryside’s cash flow problems and that
PNC chose to conduct an “extensive audit.”
Following completion
of the audit, PNC advised Countryside that it was in better shape
than it thought and agreed to increase its credit line.
PNC’s
commitment letter was dated August 8, 1995.
Thomas testified that Larry Goins (Goins), a PNC
employee, told him that Hawkes began calling PNC in July-August
1995 in regard to Countryside’s financial condition.
Thomas
stated that although PNC had originally told Countryside that the
loan would close in 7-10 days, once the phone calls started the
closing was delayed for 2-2½ months.
until November or December 1995.
-3-
The loan did not close
Thomas testified that the
closing of the loan came too late to be of any benefit to
Countryside.
Thomas stated that Goins told him that Hawkes’ phone
calls were partially responsible for the delay in the closing.
Thomas further stated that had Hawkes not made the calls the loan
would have closed earlier and it would not have been necessary to
pursue the debt restructuring agreements.
Thomas admitted that
he did not know whether Hawkes’ alleged conduct was the cause of
the delay in closing, but stated that he assumed it was.
THE FORBEARANCE AGREEMENT
It appears from an affidavit of Jerrol Miles (Miles), a
senior vice president of NCB, that Countryside defaulted on a
number of promissory notes and mortgages with NCB ranging in date
from September 28, 1990 to May 26, 1995.
Negotiations between
NCB and Countryside resulted in the execution of a forbearance
agreement (the agreement) on December 26, 1995 wherein NCB agreed
to refrain from foreclosing for six months to allow Countryside
time to remedy its default.
Thomas admitted that Countryside was
in default on its obligations to NCB at the time the agreement
was executed.
Central to this appeal is Paragraph 9 of the agreement,
which provided:
Release of Bank. In consideration of the
agreement of Bank to forbear hereunder,
Borrower and Guarantors, jointly and
severally, on behalf of themselves and all of
their respective heirs, successors and
assigns, do hereby knowingly and voluntarily
and unconditionally remise, release, acquit,
satisfy and forever discharge Bank, and its
respective past, present and future officers,
directors, employees, agents, attorneys,
-4-
representatives, participants, heirs,
successors and assigns, from any and all
manner of debts, accountings, bonds,
warranties, representations, covenants,
promises, contracts, controversies,
agreements, liabilities, obligations,
expenses, damages, judgments, executions,
claims, demands and causes of action of any
nature whatsoever, whether in law or in
equity, whether known or unknown, either now
accrued or hereafter maturing, which Borrower
and Guarantors hereafter can, shall or may
have arising out of the lending relationship
and various loan transactions currently or
previously existing among Borrower,
Guarantors and Bank. Borrower and Guarantors
agree that Bank has acted at all times in a
fair, reasonable and good faith manner in
connection with its administration and
enforcement of the Existing Loan Documents,
its dealings with Borrower and Guarantors
with respect to the Loans and the Existing
Loan Documents, and its negotiation and
consummation of this Agreement and other
transactions related to this Agreement. The
consummation of this Agreement by Borrower
and Guarantors, and their offering of the
items and documents required of them pursuant
to the terms of this Agreement, was and is
their free and voluntary deed, without any
misapprehension as to the effect thereof, and
without any coercion, duress, overreaching or
any other misconduct by Bank. Each of
Borrower and Guarantors has had the benefit
of legal counsel in connection with the
negotiation and consummation of this
Agreement, and Borrower and Guarantors agree
that Bank has in no way exercised any
management decisions, performed any business
functions relating to the operations of
Borrower, or otherwise acted in a fiduciary
capacity with respect to Borrower.
Thomas freely admitted that Countryside had knowledge
of Hawkes’s alleged conduct at the time it signed the agreement,
and further admitted that the agreement contained the release set
forth in Paragraph 9.
It is also clear that Countryside had the
advice of counsel in negotiating and executing the agreement.
However, Thomas stated that when NCB was advised by Countryside’s
-5-
attorney that it would not sign the agreement with the release in
it, NCB refused to remove the release.
When counsel for
Countryside told NCB it would sign the agreement under duress,
Miles allegedly advised them that NCB could not “legally take
away [Countryside’s] right to any lawsuit had [NCB] done
something wrong and that we had to sign it anyways.”
Thomas
testified that at that point Countryside had no other choice but
to sign the agreement.
THE CURRENT ACTION
Countryside subsequently was unable to meet its
obligations under the terms of the agreement and filed for
Chapter 11 bankruptcy protection in July 1996.
It appears that
Countryside decided to withdraw its bankruptcy petition in order
to file suit against NCB for Hawkes’s alleged conduct, and the
bankruptcy stay was lifted on November 7, 1996.
NCB filed its
foreclosure action with the trial court on December 13, 1996, and
Countryside filed its answer and counterclaim against NCB on
January 28, 1997.
Thomas admitted that all of the causes of
action set forth in Countryside’s counterclaim were directly
attributable to the phone calls allegedly made by Hawkes.
NCB filed its motion for summary judgment in April
1998.
Attached to NCB’s motion were the affidavits of Mason,
Freeman, Cox and Goins.
Mason denied telling Thomas about the
phone calls allegedly made by Hawkes to Freeman.
Cox denied that
Mason told Thomas or anyone else that NCB had contacted Freeman.
Freeman denied that anyone from NCB suggested that K&I take
action against Countryside to protects its interests.
-6-
Goins
denied telling Thomas that he received phone calls from Hawkes or
anyone else about Countryside.
Countryside responded to NCB’s summary judgment motion
in August 1998.
In support of its allegations regarding Hawkes’
conduct, Countryside specifically relied on Thomas’s deposition
testimony concerning what Mason and Goins told him.
Countryside
further relied on affidavits of Thomas and William Tally (a CPA
who performed work for Countryside) concerning Mason’s comments
regarding the alleged telephone calls.
On August 26, 1998 the trial court entered summary
judgment in favor of NCB on both its action for foreclosure and
Countryside’s counterclaim.
The trial court found that summary
judgment was proper as to NCB’s foreclosure action because:
the notes and mortgages which National City
seeks to enforce have been in default for
non-payment since before December, 1995. It
is not disputed that the notes and mortgages
were properly executed. On December 26,
1995, when Countryside executed the
Forbearance Agreement, the said notes and
mortgages were in default. The record shows
that National City fully performed its
obligations under the Forbearance Agreement,
and that Countryside remains in default for
non-payment of the said notes and mortgages
which National City seeks to enforce.
Accordingly, National City is entitled to
judgment on the foreclosure action as a
matter of law.
In regard to Countryside’s counterclaim, the trial
court found that the deposition of Thomas and the affidavits of
Thomas and William Tally concerning phone calls allegedly made by
Hawkes constituted inadmissible hearsay.
The trial court further
found that even if Hawkes had made the phone calls, there was no
cause of action for “tortious interference, bad faith, or any of
-7-
the other allegations brought by Countryside in its counterclaim
. . . . [because] the entire building community was aware that
Countryside was having substantial problems at the time of the
alleged damaging communications.”
In regard to the forbearance
agreement, the trial court found:
Countryside’s proposition that it entered
into the Forbearance Agreement with National
City under duress is without merit. National
City had every right to foreclose on the
notes and mortgages issued to Countryside for
having been in default for nonpayment prior
to entering into the Forbearance Agreement.
The fact that National City could have
foreclosed and/or might have informed
Countryside that they had this option does
not arise to duress. The Forbearance
Agreement provided Countryside a chance to
get their financial affairs in order, which
was not done.
This appeal followed.
Countryside contends that the trial court improperly
decided contested factual questions in granting summary judgment
in favor of NCB.
In particular, Countryside argues that the
trial court erred in making the following findings:
Before the end of 1994, Countryside’s
financial condition was deteriorating from
causes which were unrelated to National City.
Countryside suffered losses in 1989, 1990,
1991, 1992, 1993, 1994 and 1995.
Countryside’s financial condition continued
to decline in 1995[.]
. . . .
By late Summer (sic) 1995, Countryside’s
financial problems were common knowledge
among its trade creditors.
. . . .
The record shows that the entire building
community was aware that Countryside was
-8-
having substantial problems at the time of
the alleged damaging communications.
Having reviewed the record on appeal, most particularly
the deposition of Thomas Johns, we find this argument to be
meritless.
All of the disputed factual findings made by the
trial court came directly from Thomas’s own testimony.
He
clearly testified in regard to the losses claimed on
Countryside’s tax returns and to the various causes for its
financial crisis in 1994 and 1995.
Thomas further testified that
some of Countryside’s trade creditors were aware of its problems
by the summer of 1995 when it was unable to make timely payments.
While there may be a dispute as to whether all of Countryside’s
trade creditors knew about its financial condition or as to
whether “the entire building community” knew the extent of
Countryside’s problems at the time of the alleged phone calls,
that does not rise to the level of a genuine issue of material
fact.
[S]ummary judgment does not require that
there be no issue of fact but that there be
no genuine issue of material fact. If the
defenses have no substance, if controlling
facts are not in dispute, or factual disputes
are insignificant, summary judgment is
appropriate.
Blue Cross & Blue Shield of Kentucky, Inc. v. Baxter, Ky.App.,
713 S.W.2d 478,
479 (1986).
Countryside next argues that the trial court erred in
finding that NCB was entitled to summary judgment in regard to
Countryside’s counterclaim as a matter of law based on the
language of release contained in Paragraph 9 of the agreement.
-9-
Based on our review of the record and the language contained in
the agreement, we disagree.
The language contained in the release is clear and
unambiguous.
Under the terms of Paragraph 9, NCB is released
“from any and all manner of . . . causes of action of any nature
whatsoever . . . arising out of the lending relationship and
various loan transactions currently or previously existing[.]”
“The scope of a release is determined by ascertaining the
intention of the parties.
The “intent” is determined by
reviewing the language of the entire instrument and all of the
surrounding facts and circumstances under which the parties
acted.”
1990).
Overberg v. Lusby, 727 F.Supp. 1091, 1093 (E.D. Ky.
If parties to a release wish to except certain items from
the scope of the release, their intent to do so must be manifest
from the terms of the agreement.
Overberg, 727 F.Supp. at 1093.
It cannot be seriously argued that the alleged actions of Hawkes
did not arise from the loan transactions between Countryside and
NCB.
Because the actions Countryside complains of clearly arose
from the loan transactions, and because there is no language in
the agreement excepting Countryside’s causes of action based on
the alleged conduct of Hawkes, summary judgment was proper.
Countryside’s argument that a release of claims arising
from the terms of a contract does not act to release claims
sounded in tort is equally unavailing.
It is clear to us that the . . . agreement
that they executed was intended to tie up all
loose ends and resolve all of the claims or
disputes that might arise from the
[contractual] relationship. We also note
-10-
that [Countryside was] represented by and
consulted with counsel.
. . . .
We must conclude that the issue of [Hawkes’s
alleged conduct] was a matter within the
contemplation of the parties at the time the
. . . agreement was executed.
Overberg v. Lusby, 921 F.2d 90, 91 (6th Cir. 1990).
Countryside’s argument that a release cannot be
interpreted to bar claims which were not known at the time of
execution or those occurring or asserted a some point in time in
the future is without merit.
The record is abundantly clear that
Countryside was aware of Hawkes’s
signed the agreement.
alleged conduct at the time it
In fact, Thomas testified:
We found out about the conversations between
Mr. Hawkes and Walt Freeman on or about
October 27 [1995]. That was after we had
already entered into negotiations with our
vendors and our subcontractors. Yes, it was
before we signed the Forbearance Agreement.
And it was that reason that we had our
attorney discuss paragraph No. 9 with Mr.
Miles.
Countryside signed the release despite the fact that it had
concerns in regard to the scope of the release.
it cannot be heard to complain now.
Having done so,
See Mario’s Pizzeria, Inc.
v. Federal Sign & Signal Corporation, Ky., 379 S.W.2d 736
(1964)(holding that summary judgment is proper where claimant
read and familiarized himself with written agreement, protested
its terms, but signed anyway).
We also disagree with Countryside’s contention that the
doctrine of esjudem generis applies to this case.
The language
of the release was clear and unambiguous, otherwise Countryside
-11-
would not have been hesitant to sign it.
“[I]t is not the
function of the judiciary to change the obligation of a contract
which the parties have seen fit to make.”
O.P. Link Co. v,
Wright, Ky., 429 S.W.2d 842, 847 (1968).
As a final argument, Countryside contends that NCB is
estopped from foreclosing its notes by the equitable doctrine of
“unclean hands.”
Countryside argues that NCB owed it a duty to
safeguard information concerning its financial condition, that
NCB breached its duty by disclosing information concerning
Countryside’s financial problems to third parties, and that as a
result of this disclosure Countryside’s creditors refused to
extend further credit which resulted in Countryside’s default on
its obligations to NCB.
Despite Countryside’s arguments to the
contrary, this question was resolved in Bale v. Mammoth Cave
Production Credit Association, Ky., 652 S.W.2d 851 (1983), where
the Kentucky Supreme Court held that “alleged fraudulent conduct
of a bank or lender . . . does not as a matter of law preclude a
lender from enforcing promissory notes executed prior to the time
such conduct occurs.”
Bale, 652 S.W.2d at 855.
Because we find that NCB was entitled to summary
judgment on Countryside’s counterclaim as a matter of law based
on the release contained in Paragraph 9 of the agreement, we need
not address Countryside’s argument concerning the admissibility
of the affidavits of Thomas and William Tally.
Having considered the parties’ arguments on appeal, the
order of the Jefferson Circuit Court is affirmed.
ALL CONCUR.
-12-
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Theodore H. Amshoff, Jr.
Louisville, KY
Charles D. Greenwell
Louisville, KY
Augustus S. Herbert
Louisville, KY
-13-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
