STEPHEN B. CATRON v. CITIZENS UNION BANK
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RENDERED:
SEPTEMBER 1, 2006; 10:00 A.M.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2005-CA-001420-MR
STEPHEN B. CATRON
v.
APPELLANT
APPEAL FROM WARREN CIRCUIT COURT
HONORABLE JOHN R. GRISE, JUDGE
ACTION NO. 04-CI-00859
CITIZENS UNION BANK
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
JUDGE.
COMBS, CHIEF JUDGE; GUIDUGLI, JUDGE; BUCKINGHAM,1 SENIOR
BUCKINGHAM, SENIOR JUDGE:
Stephen B. Catron appeals from a
summary judgment of the Warren Circuit Court in favor of
Citizens Union Bank.
Over a period of about one year, the Bank
accepted several late loan payments on a promissory note
executed by Catron.
The Bank hired legal counsel to collect the
principal amount on the note with interest and late charges
after Catron again defaulted on his monthly payment.
The Bank
subsequently discovered that shortly after executing the note,
1
Senior Judge David C. Buckingham sitting as Special Judge by assignment of
the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution
and KRS 21.580.
Catron had the shares he pledged as collateral reissued in his
name.
The trial court entered summary judgment in favor of
the Bank, and it subsequently denied Catron’s motion to alter,
amend, or vacate.
On appeal, Catron argues that issues of fact
exist for trial regarding the course of dealing established by
the Bank’s notices of default and acceptance of late payments.
He also argues that issues of fact exist about whether the Bank
agreed to reinstate his loan for $8,524.80, as he claims, or for
$10,000, as the Bank claims.
Finally, Catron argues that the
terms of the promissory note are unconscionable and against
public policy.
We affirm.
Catron is an attorney who was formerly licensed to
practice in Kentucky.2
In October 1999, Catron entered into a
loan agreement with the Bank3 by executing a promissory note and
pledging 375 shares of Ohio County Bancshares, Inc., as
collateral.
The note was renewed in February 2001.
On February
11, 2003, Catron renewed the promissory note again, this time
for the principal amount of $192,069.27.
Loan payments were to
be paid monthly in the amount of $2,837.30 beginning March 10,
2003.
2
On July 12, 2004, the Kentucky Supreme Court temporarily suspended him from
the practice of law for misappropriating funds. See Inquiry Comm’n v.
Catron, 141 S.W.3d 13 (Ky. 2004).
3
The Bank was then known as the Peoples State Bank.
-2-
The note included provisions that detailed the Bank’s
remedies in the event Catron defaulted on his payments.
The
note stated, in part, as follows:
Upon my default, at the Lender’s option and
without any demand or notice to me, the
Lender may treat this loan in default and do
any one or more of the following: (a)
Declare all amounts I owe the Lender under
this Agreement immediately due and payable
...
The note also stated the following:
WAIVER OF CERTAIN RIGHTS – If the Lender
delays enforcement or decides not to enforce
any of the provisions of this Agreement,
including my Agreement to make timely
payments, it will not lose its right to
enforce the same provisions later nor any
other provisions of this Agreement. I waive
the right to receive notice of any waiver or
delay or presentment, demand, protest, or
dishonor. I also waive any applicable
statute of limitations to the full extent
permitted by law and I waive any right I may
otherwise have to require the Lender to
proceed against any person or security
before suing me to collect this loan.
Catron arranged for his bank (BB&T) to wire the
monthly payments electronically from his checking account there
to the Bank.
Catron’s payments were frequently late, and the
Bank notified him several times telephonically of its failure to
receive timely payment.
Over the next year, the Bank charged
Catron late payment penalties 12 separate times for payments
outside the 10-day grace period.
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On or about May 25, 2004, the Bank became aware that
shortly after pledging the 375 shares of Ohio County Bancshares
to the Bank, Catron applied for a new stock certificate in his
name on the ground that he had lost the certificate.
The Bank
retained counsel to take legal action against Catron.
In
response to Catron’s efforts to satisfy the Bank and avoid legal
action, the Bank sought assurance from Catron that his ability
to maintain his account was not compromised.
It claims it came
to an agreement with Catron whereby it would not accelerate the
note if Catron paid the Bank $10,000 and replaced the collateral
that he had reissued in his name.
On June 14, 2004, Catron sent a letter and partial
payment of $5,661.90 to the Bank.
He also stated that another
$2,900 would be transferred from his checking account.
The Bank
rejected the payments and returned the check to Catron’s
attorney.
On June 16, 2004, the Bank filed a complaint in the
Warren Circuit Court seeking to accelerate the note for the
remaining principal amount of $173,437.63, with interest to June
15, 2004, of $2,423.10, late charges of $50.00, and interest
from June 15, 2004, at an annual percentage rate of 24.00%.
On November 1, 2004, the Bank filed its motion for
summary judgment.
2005.
The court granted that motion on April 29,
On May 9, 2005, Catron filed a motion to alter, amend or
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vacate the summary judgment.
2005.
That motion was denied on June 20,
This appeal by Catron followed.
Catron first argues that there existed a genuine issue
of material fact regarding whether or not a course of dealing
had been created because of the Bank’s prior notices of default.
He claims that the Bank’s past dealings in that regard caused
him to reasonably rely on such notices, and since he did not
receive notice that there was a problem with his account, the
Bank should have been estopped from asserting non-payment.
The standard of review for a summary judgment is well
established.
CR4 56.03 provides in part that “[t]he judgment
sought shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, stipulations, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.”
Appellate courts will not defer to the trial court’s decision on
summary judgment, and the issue will be reviewed de novo because
only legal questions are involved.
Hallahan v. The Courier
Journal, 138 S.W.3d 699, 705 (Ky.App. 2004).
The appellate
court is to determine whether the trial court erred by
concluding that there were no genuine issues as to any material
fact and that the moving party was entitled to a judgment as a
4
Kentucky Rules of Civil Procedure.
-5-
matter of law.
1996).
Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App.
“The court must view the record in the light most
favorable to the nonmovant and resolve all doubts in his favor.”
Hallahan, 138 S.W.3d at 705.
“[T]he movant should not succeed unless his right to
judgment is shown with such clarity that there is no room left
for controversy.”
Steelvest, Inc. v. Scansteel Serv. Ctr.,
Inc., 807 S.W.2d 476, 482 (Ky. 1991).
“Only when it appears
impossible for the nonmoving party to produce evidence at trial
warranting a judgment in his favor should the motion for summary
judgment be granted.”
Id.
If the movant bears its burden of
convincing the court that no genuine issue of fact is in
dispute, the burden shifts to the party opposing the motion to
present “at least some affirmative evidence showing that there
is a genuine issue of material fact for trial.”
Id.
“The party
opposing summary judgment cannot rely on their own claims or
arguments without significant evidence in order to prevent a
summary judgment.”
Wymer v. JH Properties, Inc., 50 S.W.3d 195,
199 (Ky. 2001).
In the event a course of dealing between the parties
and the express terms of the agreement cannot be reasonably
construed as consistent with each other, the express terms of
-6-
the agreement control the course of dealing.
KRS5 355.1-205(4).
Further, a secured lender’s acceptance of late payments
generally does not constitute a waiver of the right to enforce
the terms of a security agreement.
See Price v. First Fed. Sav.
Bank, 822 S.W.2d 422, 424 (Ky.App. 1992).
Catron likens the case at hand to Howard v. Motorists
Mut. Ins. Co., 955 S.W.2d 525 (Ky. 1997).
In that case, Howard
frequently sent late premiums to her insurance company after the
policy had expired for failure to pay.
On at least two of those
occasions, Motorists Mutual continued coverage by issuing a new
policy.
Shortly after her policy had again lapsed, Howard sent
Motorists Mutual another payment.
in an automobile accident.
She was subsequently involved
Motorists Mutual rejected Howard’s
insurance claim and she sued to establish her coverage.
The
Kentucky Supreme Court held that Motorists Mutual was estopped
from denying Howard’s coverage because of its past dealing with
her, which gave rise to her reasonable detrimental reliance that
her late payment would renew her coverage.
Id. at 529.
On the other hand, the Supreme Court in Howard based
its decision in part on the fact that Howard was not given
notice of the company’s “frequent lapse” policy, which was an
internal practice to deny or terminate coverage after a certain
number of lapses.
5
The court stated, “the lack of notice of
Kentucky Revised Statutes.
-7-
those practices to Appellant establish the second and third
elements of estoppel[.]”
Id. at 528.
The Howard case is distinguishable from the present
case.
Here, Catron executed a promissory note in which he
expressly waived notice of default.
He also agreed that the
Bank could choose to assert its right to accelerate the note
even after it accepted late payments.
Since Catron received
notice of the terms of the loan agreement, his reliance on the
Howard case is misplaced.
Therefore, there is no genuine issue
of fact as to whether or not a course of dealing between Catron
and the Bank was established by the Bank’s acceptance of late
payments and past practice of notifying Catron before
considering his account in default.
Catron next argues, without citing any authority, that
the waiver of notice provision is unconscionable and against
public policy.
He claims that the “failure to have a notice of
default provision as a prerequisite to acceleration or
foreclosure on a Promissory Note precludes the other party of an
opportunity to remedy the alleged default and meet his
obligation.”
He further asserts that without such a provision,
the debtor would be subject to the arbitrary actions of the
creditor.
“An unconscionable contract has been characterized as
one which no man in his senses, not under delusion, would make,
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on the one hand, and which no fair and honest man would accept,
on the other.”
Conseco Fin. Serv. Corp. v. Wilder, 47 S.W.3d
335, 341-42 (Ky.App. 2001)(internal quotations omitted).
“The
doctrine is used by the courts to police the excesses of certain
parties who abuse their right to contract freely.”
Id.
“It is
directed against one-sided, oppressive and unfairly surprising
contracts, and not against the consequences per se of uneven
bargaining power or even a simple old-fashioned bad bargain.”
Id.
Notice of dishonor of a negotiable instrument can be
waived if proven through clear and satisfactory proof.
See
Baker v. Valentine, 216 Ky. 801, 288 S.W. 771, 772 (1926).
Furthermore, KRS 355.3-504(2) provides that notice of dishonor
is excused if “[t]he party whose obligation is being enforced
waived notice of dishonor.”
If so agreed, and in any event
after default, a secured party “[m]ay notify an account debtor
or other person obligated on collateral to make payment or
otherwise render performance to or for the benefit of the
secured party[.]”
KRS 355.9-607(1)(a). (Emphasis added.)
Here, Catron entered into the loan agreement at arm’slength and executed the promissory note with notice of the
relevant acceleration provisions.
Catron defaulted on his
payments numerous times, and he withdrew the collateral securing
the Bank’s interest.
Thus, it cannot be said that the Bank’s
-9-
actions in accelerating the note were arbitrary or surprising to
him.
In short, we reject Catron’s argument because he waived
notice of dishonor and also cited no authority to support his
argument.
Therefore, the trial court properly rejected Catron’s
argument that the terms of the note were unconscionable.
Finally, Catron argues for the first time on appeal
that an issue of fact existed about whether the Bank agreed to
reinstate his loan for $8,524.80, as he claims, or for $10,000,
as the Bank claims.
“It goes without saying that errors to be
considered for appellate review must be precisely preserved and
identified in the lower court.”
Skaggs v. Assad, By and Through
Assad, 712 S.W.2d 947, 950 (Ky. 1986).
The appellant’s brief
“shall contain at the beginning of the argument a statement with
reference to the record showing whether the issue was properly
preserved for review and, if so, in what manner.”
CR
76.12(4)(c)(v).
Catron has not shown where and in what manner this
argument was preserved for appeal.
Furthermore, he raises it
for the first time in his reply brief.
“The reply brief is not
a device for raising new issues which are essential to the
success of the appeal.”
(Ky.App. 1979).
Milby v. Mears, 580 S.W.2d 724, 728
Therefore, we will not consider Catron’s
argument in this regard.
-10-
The summary judgment of the Warren Circuit Court in
favor of the Bank is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Brian K. Pack
Glasgow, Kentucky
Helene Gordon Williams
Louisville, Kentucky
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