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Kourt Security Partners, LLC v. United Bank, Inc.

Supreme Court of West Virginia

March 9, 2018

Kourt Security Partners, LLC, Defendant Below, Petitioner
United Bank, Inc., Plaintiff Below, Respondent

         Monongalia County 15-C-733


         Petitioner Kourt Security Partners, LLC ("Kourt Security"), by counsel Charles J. Kaiser, Jr. and Jeffery D. Kaiser, appeals the Circuit Court of Monongalia County's "Order Granting Plaintiff's Motion for Summary Judgment, " entered on November 28, 2016. Respondent United Bank, Inc. ("United Bank"), by counsel Shawn P. George, filed a response. Kourt Security filed a reply.

         This Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's order is appropriate under Rule 21 of the Rules of Appellate Procedure.

         Factual and Procedural Background

         In the underlying litigation in this case, United Bank sought a declaratory judgment that Kourt Security was indebted to it for the amounts due on two loans that United Bank made to another company, MB Security, Inc. ("MB Security"), in 2012. MB Security was a company established by Mitchell Brozik to manage the assets of his former security and alarm business, Secure US, Inc. ("Secure US"). Kourt Security purchased those assets in 2014 from Mr. Brozik's aunt, Betty Parmer. Kourt Security disputed that United Bank had any claim against it, arguing that it was a good faith purchaser of the assets. Prior to the close of discovery, the circuit court granted summary judgment in favor of United Bank, and this appeal followed.

         To understand the present dispute, it is necessary to briefly examine several prior financial transactions involving Mr. Brozik and Ms. Parmer. In 2007, Secure U.S. obtained a loan from the predecessor bank of Bank of America. Mr. Brozik then experienced financial difficulties and sought the assistance from a family friend, Milan Puskar, who purchased the Bank of America note for $3.5 million. Mr. Brozik borrowed an additional $900, 000 from the Puskar Trust. After Mr. Puskar died in 2011, the Puskar Trust held both debts.

         Secure U.S. had been engaged in litigation in federal court with another security company, Security Alarm Financing Enterprises, LLC ("SAFE"). In this federal litigation, SAFE obtained a judgment against Secure U.S. for more than $1.1 million in 2010. In 2012, SAFE attempted to collect on the judgment, and a federal magistrate ordered a foreclosure sale of the Secure U.S. assets for May 16, 2012. The Puskar Trust lien on the Secure U.S. assets was senior to the SAFE judgment. At this point, Ms. Parmer agreed to assist Mr. Brozik with his debts. In April of 2012, Ms. Parmer obtained a loan from Centra Bank (now United Bank) in Morgantown, West Virginia, and purchased the Puskar Trust debt for $2.5 million. As a result, Ms. Parmer stood in the shoes of the Puskar Trust, obtaining all of the rights that it held in the debts.

         Ms. Parmer then demanded payment from Mr. Brozik, who responded that he was unable to make the payment. Ms. Parmer then arranged for the Secure U.S. assets to be sold at a foreclosure sale, which occurred on May 5, 2012. At the sale, Ms. Parmer purchased the assets for $4 million, making her the owner of the Secure U.S. assets.[1] As owner of the Secure U.S. assets, Ms. Parmer signed an agreement in August of 2012 granting Mr. Brozik the authority to manage, protect, and borrow upon the assets through a newly-established company, MB Security.

         In August and September of 2012, MB Security and Mr. Brozik obtained two loans from United Bank, totaling $827, 000, that are relevant to the present case. First, they refinanced a $150, 000 vehicle loan. This loan was secured by vehicles already owned or subsequently used in the Secure U.S. business. In the second loan, Mr. Brozik and MB Security borrowed $677, 000 from United Bank to satisfy existing creditors and supply working capital for the business. This latter loan was allegedly secured by the Secure U.S. assets, as evidenced by agreements signed by Mr. Brozik as Ms. Parmer's power of attorney.

         In September of 2013, Ms. Parmer filed suit against Mr. Brozik and MB Security, among others, claiming that the transactions which led her to own the Secure U.S. assets were conducted without her full understanding and consent. She further alleged that Mr. Brozik used MB Security to convert the Secure U.S. assets for his own use.[2] Thereafter, in that litigation, the circuit court granted Ms. Parmer partial summary judgment, which relieved her of the obligation to comply with the management agreement with MB Security and required Mr. Brozik and MB Security to relinquish control of the former Secure U.S. assets that she owned. In May of 2014, Ms. Parmer entered into a management agreement with Kourt Security to manage the assets.

         Also in May of 2014, the federal court in the SAFE litigation held that the SAFE lien on the Secure U.S. assets was not extinguished by the May 5, 2012, foreclosure sale; Ms. Parmer was liable for the SAFE judgment; and granted SAFE a judgment against Ms. Parmer for $1.1 million. In November of 2014, Kourt Security purchased the Secure U.S. assets from Ms. Parmer.

         United Bank filed the present action against Kourt Security in November of 2015, claiming that Kourt Security was liable for the two loans that United Bank made to MB Security in 2012, which were allegedly secured by the Secure U.S. assets that Kourt Security bought from Ms. Parmer in 2014. In its defense, Kourt Security denied that United Bank possessed any enforceable liens encumbering the Secure U.S. assets. Additionally, Kourt Security filed interrogatories and requests for production for documents related to the origination, processing, management, and enforcement of the United Bank loans and security interests at issue.

         United Bank moved for summary judgment, arguing that it had a first priority secured lien in the Secure U.S. assets at the time Kourt Security purchased them; that the lien survived the sale and remains intact; that Kourt Security bought the Secure U.S. assets subject to United Bank's senior security interest; and that United Bank was entitled to take possession of the collateral. United Bank argued that it never authorized the disposition of the Secure U.S. assets free of its security interest. Kourt Security argued it was a good faith purchaser of the assets and United Bank has no claim against it. By order entered on November 28, 2016, the circuit court granted United Bank's motion for summary judgment, ruling that United Bank had a perfected ...

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