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Westlake v. BMO Harris Bank, N.A.

United States District Court, D. Kansas

June 17, 2015

SCOTT WESTLAKE AND VICKI WESTLAKE, Plaintiff,
v.
BMO HARRIS BANK, N.A., Defendant.

MEMORANDUM & ORDER

CARLOS MURGUIA, District Judge.

Plaintiffs Scott and Vicki Westlake brought this action against defendant BMO Harris Bank, NA ("BMO"), [1] alleging claims of breach of contract, conversion, promissory estoppel, unjust enrichment, and breach of agency contract. The parties have filed many motions but only one is before the court: BMO's motion for summary judgment (Doc. 124).

I. Factual Background

BMO's motion for summary judgment set forth 102 statements of fact. Plaintiffs, however, controverted only twenty-four. The following facts are undisputed.

On November 12, 2001, plaintiffs executed a Joint Management Agency Agreement (the "JMAA"), establishing a joint management agency account (the "Investment Account") to be held at Gold Trust Company ("Gold Trust").

In March 2003, plaintiffs executed and delivered to Gold Bank a promissory note in the original principal balance of $1, 800, 000 ("Loan 506"). They also executed an Assignment of Investment Properties/Securities (the "2003 Pledge Agreement").

In March 2004, plaintiffs signed another promissory note in favor of Gold Bank in the original principal amount of $2, 000, 000 ("Loan 509"). Again, they executed an Assignment of Investment Property/Securities (the "2004 Pledge Agreement"), pledging the Investment Account as collateral for "[a]ll present and future debts from me [plaintiffs] to you [Gold Bank], even if this Agreement is not specifically referenced, the future debts are also secured by other collateral, or if the future debt is unrelated to or of a different type that this debt." (Doc. 125-9 at 2, ¶ 1.B.) It further provided that "[i]f more than one person signs this Agreement, each agrees that it will secure debts incurred either individually or with others who may not sign this Agreement." ( Id. ) As part of this transaction, plaintiffs, Gold Bank, and Gold Trust executed an Account Control Agreement (the "2004 Control Agreement"), under which plaintiffs acknowledged they pledged the Investment Account as collateral for loans from Gold Bank and agreed that Gold Trust would be obligated to "comply with entitlement orders originated by Gold [Bank] concerning the Account without consent by Debtor [plaintiffs]." (Doc. 125-10 at 2-3, ¶ 4.)

In February 2005, Gold Bank made loans to Old Corkscrew Golf Club, LLC ("OCGC") evidenced by two promissory notes executed by OCGC in favor of Gold Bank, which were amended and restated over the years (collectively the "OCGC Notes").

In January 2006, plaintiffs refinanced one of its loans, executing a promissory note in favor of Gold Bank in the principal amount of $3, 000, 000. As part of this refinance, plaintiffs signed an Assignment of Investment Property/Securities (the "2006 Pledge Agreement"), which was virtually identical to the 2004 Pledge Agreement.

At some point in the first few months of 2006, M&I Marshall Illsley Bank ("M&I") succeeded Gold Bank via merger. In March 2006, M&I loaned Old Corkscrew Plantation VII ("Felda")[2] a principal amount of $17, 600, 000. In March 2006, Scott Westlake executed a guaranty agreement promising to pay the indebtedness owed to M&I by Felda in the maximum amount of $5, 000, 000 (the "Felda Guaranty").

In August 2006, BMO made loans to Old Corkscrew Plantation, LLC; Old Corkscrew Plantation II, LLC; Old Corkscrew Plantation III, LLC; Old Corkscrew Plantation IV, LLC; Old Corkscrew Plantation V, LLC; Old Corkscrew Plantation VI, LLC; and Felda in the principal amounts of $20, 000, 000 and $40, 000, 000. That same day, Scott Westlake personally guaranteed, in part, those promissory notes pursuant to an unconditional, continuing guaranty agreement.[3]

In April 2007, Scott Westlake signed a commercial guaranty under which he personally promised to be responsible for the debt owed by Alico Lakeside, LLC to M&I, up to $333, 000 (the "Alico Guaranty").[4] In September 2007, plaintiffs executed a promissory note in favor of M&I in the principal amount of $3, 000, 000, representing a revolving line of credit (the "2007 Line of Credit"). As security for the 2007 Line of Credit, plaintiffs executed and delivered to M&I a Commercial Pledge and Security Agreement (the "2007 Pledge Agreement"), pledging the Investment Account as collateral for the 2007 Line of Credit. Additionally, the 2007 Pledge Agreement contained a provision on the first page with the heading "CROSS-COLLATERALIZATION" which provides as follows:

In addition to the Note, this Agreement secures all obligations, debts and liabilities, plus interest thereon, of Grantor to Lender, or any one or more of them, as well as claims by Lender against Grantor or any one or more of them, whether now existing or hereafter arising, whether related or unrelated to the purpose of the Note, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated, whether Grantor may be liable individually or jointly with others, whether obligated as a guarantor, surety, accommodation party or otherwise, and whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations, and whether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable.

(Doc. 125-15 at 1.)[5]

In September 2008, plaintiffs executed another promissory note in favor of M&I in the principal amount of $3, 000, 000, representing a revolving line of credit (the "2008 Line of Credit"). Once again, plaintiffs executed a Commercial Pledge Agreement (the "2008 Pledge Agreement"), granting M&I a security interest in the Investment Account as collateral for the 2008 Line of Credit. It also contained a cross-collateralization provision identical to the one above.

In August 2009, Scott Westlake personally guaranteed, in part, OCGC's obligations under the OCGC Notes pursuant to an Amended and Restated Guaranty Agreement (the "OCGC Guaranty").

In November 2010, an M&I loan officer sent a letter to OCGC and its guarantors, including Scott Westlake, which outlined and rejected OCGC's proposal for the guarantors to inject capital into OCGC in exchange for a reduction of their guaranty liabilities. In that letter, M&I also stated:

In order to avoid any unnecessary confusion on the part of any party going forward, you should understand that no commitments, assurances, discussions or agreements on behalf of M&I Marshall & Ilsley Bank with respect to the Loan Documents shall be effective and may not be relied upon unless in writing (email communications are considered to be the same as verbal communications and not a form of written commitment) and duly executed on behalf of M&I Marshall & Ilsley Bank.

(Doc. 125-20 at 3.)

On December 16, 2010, Mike Cross, a BMO representative, [6] sent an email to Scott Westlake proposing five terms as part of negotiations between OCGC and BMO:

1. Scott Westlake injects $250, 000 into the golf course to bring its vendors current and pay interest to BMO;
2. Scott Westlake receives a $250, 000 credit against his guaranty reducing it to $1, 250, 000 which ...

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