United States District Court, S.D. West Virginia, Huntington Division
MEMORANDUM OPINION AND ORDER
C. CHAMBERS UNITED STATES DISTRICT JUDGE
before the Court are motions by Plaintiff, Fifth Third Bank
("Fifth Third") (ECF Nos. 32, 49, 56) and
Defendants, Revelation Energy, LLC ("Revelation")
and Revelation Energy Holdings, LLC ("REH") (ECF
No. 47). For the following reasons, the Court GRANTS,
in part, Plaintiffs Motion for Summary Judgment,
insofar as the terms of the Loan Documents and Forbearance
Agreement were breached and Defendants are liable for
damages, and HOLDS IN ABEYANCE the
determination of damages (ECF No. 32),
DENIES Defendants' Motion for Partial
Summary Judgment (ECF No. 47), HOLDS IN
ABEYANCE Plaintiffs Motion to Supplement Record on
Summary Judgment (ECF No. 49) and Plaintiffs Motion to Strike
Jury Trial Demand (ECF No. 56), SUSPENDS all
calendar deadlines, and ORDERS Plaintiff to
file a memorandum outlining relief consistent with the
Complaint and include breakdowns of the calculations of
monies owed under the Notes and, alternatively, the
Forbearance Agreement by May 2, 2019.
Defendants shall respond to Plaintiffs memorandum by
May 9, 2019.
12, 2011, Fifth Third made an initial loan to Revelation in
the principal amount of $20, 000, 000.00. First
Note, ECF No. 33-1. This loan was guaranteed by REH.
First Guaranty, ECF No. 33-2. On July 2, 2012, Fifth
Third made an additional loan to Revelation in the amount of
$5, 200, 000.00, also guaranteed by REH. Second
Note, ECF No. 33-3; Second Guaranty, ECF No.
33-4. Both Notes were amended on April 22, 2013.
Amendment, ECF No. 33-5. All documents cited in this
paragraph constitute the "Loan Documents." After
the occurrence of "certain conditions constituting
defaults," the parties entered into a forbearance
agreement on March 31, 2017. Forbearance Agreement,
p. 2, ECF No. 33-6. The Forbearance Agreement affirmed the
duties of the parties under the Loan Documents and explicitly
preserved the rights to remedy by Fifth Third for
Defendants' past defaults. Id. at 3. The
Forbearance Agreement marked the fourth time parties
restructured their repayments. Compl, ¶ 4, ECF
No. 1; Defs.' Resp. to Mot. Summ. J., p. 4, ECF
No. 34. In return for Fifth Third's agreement to forbear,
Defendants' stipulated they owed a total of $7, 662,
684.94 on the principal amount between the two loans and
$243, 829.80 in interest and fees as of December 31,
2016.Forbearance Agreement, at 3.
Defendants agreed this principal amount would accrue interest
at four percent per annum and Revelation would make payments
of $120, 000.00 per month, starting at the date of signing
and paying off the remaining principal, remaining interest
and fees, and any accrued interest, in full, by February 1,
2018. Id. at 6. Subsequently, Revelation missed
payments in September and October, and did not pay off its
remaining balance by February 1, 2018. Notice of
Default, ECF No. 1-12; Answer, ¶ 37, ECF
No. 11; Defs. 'Resp. to Mot. Summ. J., at 4.
filed the Complaint on February 6, 2018, alleging claims of
breach of contract under the Loan Documents (Counts One and
Two) and, alternatively, under the Forbearance Agreement
(Count Three). Comply at 6-7. After failing to file
a timely response, the Clerk entered default against
Defendants on March 12, 2018. ECF No. 9. On March 16, 2018,
Defendants filed the Motion to Set Aside Entry of Default,
ECF No. 12, and an Answer to Plaintiffs Complaint, which
included two counterclaims. Answer, at 11-15. The
Court vacated the entry of default on April 18, 2018. ECF No.
17. Defendants' Counterclaims were dismissed on December
19, 2018 for failure to state a claim. ECF No. 41. The Court
now turns to the claims in the Complaint.
STANDARD OF REVIEW
moving for summary judgment must show there is no genuine
issue of any material fact and that it is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a). In
considering this, the Court shall not "weigh the
evidence and determine the truth of the matter[.]"
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
(1986). However, the Court shall draw any permissible
inference from the underlying facts in the light most
favorable to the nonmoving party. Matsushita Elec. Indus.
Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88
(1986). The nonmoving party must offer some "concrete
evidence from which a reasonable juror could return a verdict
in his [or her] favor[.]" Anderson, Ml U.S. at
256. Summary judgment is appropriate when the nonmoving party
has the burden of proof on an essential element of his or her
case and does not make, after adequate time for discovery, a
showing sufficient to establish that element. Celotex
Corp. v. Catrett, Ml U.S. 317, 322-23 (1986). The
nonmoving party must satisfy this burden of proof by offering
more than a mere "scintilla of evidence" in support
of his or her position. Anderson, 477 U.S. at 252.
argues Defendants breached of contract under the terms of the
Loan Documents and, alternatively, the Forbearance Agreement,
and move for summary judgment on the matter. Defendants move
for partial summary judgment on an underlying allegation of
Choice of Law
threshold matter, the Court must determine the applicable law
for the Loan Documents. "When exercising diversity
jurisdiction, a federal district court must apply the
choice-of-law rules of the state in which it sits."
Cavcon, Inc. v. Endress ± Hauser,
Inc., 557 F.Supp.2d 706, 719 (S.D. W.Va. 2008) (citing
Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S.
487, 496 (1941). Generally, West Virginia courts will uphold
a choice of law provision in a contract. However, "[a]
choice of law provision in a contract will not be given
effect when the contract bears no substantial relationship
with the jurisdiction whose laws the parties have chosen to
govern the agreement, or when the application of that law
would offend the public policy of this state."
General Electric Company v. Keyser, 275 S.E.2d 289,
Syl. Pt. 1 ( W.Va. 1981). Here, the parties do not contest
the choice of law provision in either Note. As such, the
First Note is interpreted under Ohio law, whereas the second
note is interpreted under West Virginia law. First
Note, ¶ 18(b); Second Note, ¶ 7.14.
do not contest that the Forbearance Agreement was
precipitated by events constituting breach under the original
Notes and was preceded by three other forbearance agreements.
Compl, ¶ 4; Defs.' Resp. to Mot. Summ.
J., at 4. The only defense raised by Revelation and REH
is that, when Revelation fell behind on its repayments once
again, it assumed it could alter the terms of the note
unilaterally as part of a "usual course of
dealings." Defs. 'Resp. to Mot. Summ. J.,
at 5. However, this is not a cognizable defense under either
Ohio or West Virginia law.
PNC Equip. Fin., LLC v. Mariani, the defendant
failed to remit full repayment of a loan after four
forbearance agreements. No. 1:14-CV-663, 2017 WL 1102809, at
*3 (S.D. Ohio 2017) (applying Ohio law). The defendant
claimed this established a "pattern and practice [of
extending the forbearance period] that Defendants came to
rely on and expect. Id. at *6. The court held that
this argument was not legally sufficient, because the
forbearance agreement did not require further ...