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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY BOWLING GREEN DIVISION CIVIL ACTION NO. 1:11-CV-00185
SOUTH CENTRAL BANK, INC., f/k/a SOUTH CENTRAL BANK OF BARREN COUNTY, INC. v. KELLY KNIFELY, and VIRGINIA KNIFELY Defendants Plaintiff

MEMORANDUM OPINION This matter is before the Court upon Plaintiff South Central Bank, Inc., f/k/a South Central Bank of Barren County, Inc.'s (South Central Bank) Motion for Summary Judgment. (Docket No. 13.) Defendants Kelly Knifely and Virginia Knifely

(collectively, "the Knifelys") have responded, (Docket No. 14), and South Central Bank has replied, (Docket No. 15). This matter is now ripe for adjudication. For the reasons that follow, the Court will GRANT South Central Bank's Motion for Summary Judgment. BACKGROUND The essential facts of this matter are not disputed. This litigation arises out of a Guaranty Agreement executed by the Knifelys in which they guaranteed the payment of debts incurred by Beals Management, Inc. The Knifelys were involved in several business transactions with Timothy Beals, owner of Beals Management. Beals

Management obtained a loan from South Central Bank on February 2, 2004, in the

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original principal amount of $187,634. (Docket No. 1-2.) Beals, his wife, and the Knifelys each signed the Guaranty Agreement on February 4, 2004. In that agreement, the Knifelys agreed to be jointly and severally guarantee the debt of Beals Management. The Guaranty Agreement specified the termination date as January 1, 2015, and the maximum aggregate liability as $285,000. (Docket No. 1-1.) In addition to that

maximum aggregate liability, the Knifelys further agreed to be liable for "interest accruing on the guaranteed indebtedness, and fees, charges and costs of collecting the guaranteed indebtedness, including reasonable attorneys' fees." (Docket No. 1-1.)

Beals Management subsequently defaulted on the loan at issue, and South Central Bank now seeks to enforce the Guaranty Agreement against the Knifelys to collect on Beals Management's debt. STANDARD Summary judgment is appropriate where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). "[N]ot every issue of fact or conflicting inference presents a genuine issue of material fact." Street v. J.C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989). The test is whether the party bearing the burden of proof has presented a jury question as to each element in the case. Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir. 1996). The plaintiff must present more than a mere scintilla of evidence in support of her position; she must present evidence on which the trier of fact could reasonably find for her. Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Mere speculation will not suffice to defeat a motion for summary judgment: "[T]he mere Page 2 of 8

existence of a colorable factual dispute will not defeat a properly supported motion for summary judgment. A genuine dispute between the parties on an issue of material fact must exist to render summary judgment inappropriate." Monette v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir. 1996), abrogated on other grounds by Lewis v. Humboldt Acquisition Corp., Inc., 681 F.3d 312 (6th Cir. 2012). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Still, "[a] party asserting that a fact cannot be or is genuinely disputed must support the assertion by . . . citing to particular parts of materials in the record . . . or showing that the materials cited do not establish the absence or presence of a genuine dispute." Fed. R. Civ. P. 56(c)(1). "The court need consider only the cited materials, but it may consider other materials in the record." Fed. R. Civ. P. 56(c)(3). Finally, while the substantive law of Kentucky is applicable here pursuant to Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), a federal court sitting in diversity applies the standards of Fed. R. Civ. P. 56, not "Kentucky's summary judgment standard as expressed in Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W2d 476 (Ky. 1991)." Gafford v. Gen. Elec. Co., 997 F.2d 150, 165 (6th Cir. 1993), abrogated on other grounds by Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010). DISCUSSION The Knifelys raise two arguments why a genuine factual dispute exists that would preclude summary judgment in favor of South Central Bank. Both are without merit. Page 3 of 8

I.

Statute of Frauds In their Answer 1 to South Central Bank's Complaint, the Knifelys posit that they

were released from liability "by a duly authorized representative" of South Central Bank. (Docket No. 9, at 1-2.) In his deposition, Kelly Knifely clarifies that this refers to an oral statement he claims was made to him by South Central Bank loan officer Dennis Wilcutt. (Docket No. 13-2, at 18.) The Knifelys admit there is no written document signed by a representative of South Central Bank that either modifies the Guaranty Agreement or releases them from liability. (Docket Nos. 13-2, at 19; 13-4, at 3.) The Court will assume, for purposes of this Opinion, that Wilcutt did, in fact, make an oral representation to the Knifelys that South Central Bank released them from their obligations under the Guaranty Agreement. However, even assuming that allegation is true, any such oral modification would be unenforceable under the Kentucky Statute of Frauds. The Kentucky Statute of Frauds requires that personal guaranties must be in writing and signed by the party to be charged to be enforceable: No action shall be brought to charge any person: .... (4) Upon any promise to answer for the debt, default, or misdoing of another; .... unless the promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, be in writing and signed by the party to be charged therewith, or by his authorized agent. . . .

1

Despite raising this argument in their Answer, the Knifelys do not directly discuss this argument in their Response to the instant motion for summary judgment.

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Ky. Rev. Stat.

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