Civil (Estoppel): CATRON V. CITIZENS UNION BANK (COA 9/1/2006)

CATRON V. CITIZENS UNION BANK
CIVIL PROCEDURE:  Summary judgment (genuine issue of material fact);
CONTRACTS:  Course of dealing and estoppel; waiver of notice 
2005-CA-001420
PUBLISHED – AFFIRMING (BUCKINGHAM) 
DATE RENDERED: 9/1/2006

Stephen B. Catron appeals from a summary judgment 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, 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 and 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.  He further argued the terms of the promissory note are unconscionable and against public policy.

COA disagreed, affirmed the lower court since Catron had received notice of the terms of the loan agreement, his reliance on Howard v. Motorists Mut. Ins. Co., 955 S.W.2d 525 (Ky. 1997) 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.

In Howard v. Motorists Mut. Ins. Co., 955 S.W.2d 525 (Ky. 1997), Howard frequently sent late premiums to her insurance company after the policy had expired for failure to pay with Motorists Mutual continuing coverage by issuing a new policy on at least two occasions. Shortly after her policy had again lapsed, Howard sent Motorists Mutual another payment. She was subsequently involved in an automobile accident. 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. The court stated, “the lack of notice of 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.

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