Date: 01-31-2014

Case Style: Stephen J. Breedlove v. Commercial Bank of Parsons Kansas

Case Number: CJ-2008-5837

Judge: Jefferson D. Sellers

Court: District Court, Tulsa County, Oklahoma

Plaintiff's Attorney: Paul Robert Tom

Defendant's Attorney: Robert c. Butler, III, Charles Greenough, Michael Andrew Pollard and David K. Wheeler

Description: Stephen J. Breedlove and Donna M. Breedlove sued Commercial Bank of Parsons Kansas, Ray Feess and Phillip Easton on malicious prosecution, loss of consortium, civil conspiracy, abuse of process and intentional infliction of emotional distress theories.

The pre-trial order entered by the Court provided in part:

* * *

B. General Statement of Facts:

a. What: Plaintiff Stephen Breedlove owned and operated a car dealership in Parsons, Kansas, through his company Breedlove Automotive Group, Inc. Commercial Bank loaned money to the dealership, and the dealership’s used cars were pledged as collateral for the loan. The car dealership went out of business in September of 2002.

b. Where: Alleged acts occurred in Parsons, Kansas, and Tulsa, Oklahoma.

c. When: 2002 through 2007.

d. Who: Stephen Breedlove and Donna Breedlove, husband and wife, are the Plaintiffs. Stephen Breedlove owned and operated Breedlove Automotive Group, Inc., which went out of business in September of 2002. Breedlove Automotive borrowed money from Defendant Commercial Bank. Defendant Commercial Bank of Parsons, Kansas is a Kansas state banking association with its main office in Parsons, Kansas. Phillip Eaton is the President of Commercial Bank, and Ray Feess is a Vice President. Both are still employed by Commercial Bank.

C. Plaintiff’s Contentions:

Plaintiff, Stephen J. Breedlove owned and operated a car dealership named Breedlove Automotive Group, Inc. in Parsons, Kansas from 1992 through September of 2002. From April 15, 1997 until September 25, 2002, Defendant Commercial Bank of Parsons, Kansas, financed Breedlove Automotive Group’s used car inventory pursuant to series of three Floor Plan Financing Agreements (“FPFA). All three FPFAs were identical in nearly all respects. From April 15, 1997 until sometime in July 2002, Breedlove Automotive Group was allowed to borrow on the Floor Plan Loan up to the value of its used car inventory. When the amount loaned exceeded the value of the used car inventory, Breedlove Automotive Group had to pay down the loan. When the value of the used car inventory exceeded the amount of funds loaned on the Floor Plan Loan, Breedlove Automotive Group was allowed to borrow additional money on the Floor Plan Loan up to the value of the used car inventory. From April 15, 1997 until sometime in July 2002, neither the Bank nor Breedlove Automotive Group made any effort to tie funds loaned by the Bank or payments made to the Bank by Breedlove Automotive Group to any particular vehicle in Breedlove’s used car inventory.

Breedlove Automotive Group failed and went out of business on September 25, 2002. In early 2004, the Bank contacted the Labette County prosecutor alleging that Breedlove had intentionally violated Kansas criminal law (KSA §21-3734) by failing to pay over the amount received from used vehicles financed by the Bank within three days after a used vehicle financed under the FPFA was sold. In order to convince the Kansas authorities to try Stephen Breedlove for violating KSA §21-3734, Defendant Ray Feess falsely testified at a preliminary hearing, among other things, that:

1. The FPFA was in place for 10 years;

2. The FPFA operated as it was drafted;

3. For the ten years the Bank claims that the Floor Plan Loan was in existence, the Bank tied funds advanced under the Floor Plan Loan to specific vehicles purchased by Breedlove Automotive Group;

4. The Bank held the title to each vehicle purchased under the FPFA until the vehicle was sold by Breedlove Automotive, at which time Breedlove Automotive tendered the loaned funds to the Bank, and the title was released by the Bank to Breedlove Automotive.

Further, Defendants failed to inform the Criminal Court in Labette County, Kansas of the truth, as expressed in detail in the Memorandum Opinion rendered in the adversary bankruptcy proceeding (Ds’ Ex 74).

All claims of Donna Breedlove are dismissed.

D. Damages or Relief Sought Amount

a. Personal injuries (emotional distress): $1,500,000 (Defendants object as these damages were not disclosed in discovery.)

b. Damage to plaintiffs’ reputation and character $3,000,000 (Defendants object as these damages were not disclosed in discovery.)

c. Pain and suffering:

d. Medical and hospital expense:

N/A

N/A

e. Loss of earnings and impairment of earning capacity: $882,023 (Defendants object as these damages were not disclosed in discovery and as speculative.) f. Property Loss:

N/A

g. Attorney Fees/costs defending malicious prosecutions:

145,000.00

h. Other: Punitive Damages:

Jury

E. Defendants’ Contention:

Plaintiff Stephen Breedlove owned and operated Breedlove Automotive Group, Inc. (“Breedlove Automotive”), a company which borrowed several hundred thousand dollars from Defendant Commercial Bank of Parsons, Kansas. At all relevant times, Phillip Eaton was the President of the Bank, and Ray Feess was a Vice President of the Bank. Both of them represented the Bank in its dealings with Stephen Breedlove and Breedlove Automotive. The primary collateral for the Bank’s loans to Breedlove Automotive was its used car inventory under a floor plan loan.

Breedlove Automotive closed in September of 2002, shortly after GMAC, which was the floor plan lender for Breedlove Automotive’s new car inventory, conducted an inventory audit and discovered that Breedlove had sold cars “out of trust” - meaning the cars had been sold to buyers but Breedlove Automotive had not paid the proceeds to GMAC as required. Although Stephen Breedlove has tried to deny that he ever sold cars out of trust, he signed a Forbearance Agreement with GMAC dated September 5, 2002 admitting that fact. When the Bank learned about the GMAC out of trust sales, it investigated the status of its own used car collateral and discovered that Breedlove Automotive had also sold several used cars which were the Bank’s collateral without paying the proceeds to the Bank.

After an attempted sale of Breedlove Automotive fell through, it was closed and all of its assets liquidated. The Bank suffered a significant total loss on its loans to Breedlove Automotive. After the business closed, Plaintiffs liquidated all of their assets, without paying the Bank or their other creditors, and used the proceeds of approximately $300,000.00 to buy a house in Tulsa which was exempt from attachment by their creditors. Stephen Breedlove also filed Chapter 7 bankruptcy in order to try to discharge his debts.

Because the Bank believed that Stephen Breedlove’s actions in selling its collateral without paying the proceeds to the Bank were illegal, Defendants provided information to the Attorney General of Kansas in good faith, believing that Stephen Breedlove had committed the criminal offense of impairment of a security interest under Kansas law. Defendants also acted in good faith in filing an Adversary Proceeding in Stephen Breedlove’s bankruptcy case seeking to have all of Stephen Breedlove’s indebtedness to the Bank, including that portion of Stephen Breedlove’s indebtedness tied to “out of trust” car sales, ruled non-dischargeable under 11 U.S.C. § 523.

Defendants’ actions were not malicious, and Defendants had probable cause to instigate both matters. Defendants made a full, honest, and fair disclosure of the facts which they knew or reasonably should have known to the Office of the Attorney General of the State of Kansas, and such attorney(s) then decided to prosecute Stephen Breedlove. Testimony given by Ray Feess at the Preliminary Hearing held in the Kansas criminal case is absolutely privileged and cannot form the basis for any civil liability. Defendants also made a full, honest, and fair disclosure of the facts which they knew or reasonably should have known to the attorneys who filed the Adversary Proceeding for them, and Defendants relied on the advice of such attorneys in filing the Adversary Proceeding. Judge Rasure’s finding of fact in the Memorandum Opinion that cars were sold “out of trust” is determinative of the issue of probable cause and bars all of Plaintiffs’ claims. The Kansas criminal matter was dismissed without prejudice, so Plaintiff Stephen Breedlove cannot establish that it was legally and finally terminated in his favor. Defendants’ actions in instigating the criminal charges and filing and maintaining the Adversary Proceeding were not malicious, were not extreme and outrageous, and Stephen Breedlove did not suffer any severe emotional distress. Plaintiffs’ claims for emotional distress and injury to reputation are barred because they were not disclosed in discovery. All of Plaintiffs’ lost income claims are barred because Stephen Breedlove’s testimony establishes that his inability to get a sales manager or general manager position was not due to any actions of any Defendant. . Plaintiffs may not seek damages for either (1) personal injuries/emotional distress or (2) damage to reputation and character because such damages were not disclosed in Plaintiffs’ discovery responses to Defendants’ discovery which sought the amount of damages sought by Plaintiffs for each type of damage or injury claimed and the amount of compensatory damages which Plaintiffs’ believe would fairly compensate them.

Outcome: 01-29-2014 DISPJD 1 COMMERCIAL BANK OF PARSONS KANSAS 88220051 Jan 29 2014 2:58:18:183PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED. 01-29-2014 DISPJD 2 COMMERCIAL BANK OF PARSONS KANSAS 88220052 Jan 29 2014 2:58:18:763PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED.

01-29-2014 DISPJD 3 COMMERCIAL BANK OF PARSONS KANSAS 88220053 Jan 29 2014 2:58:19:003PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED.

01-29-2014 DISPJD 4 COMMERCIAL BANK OF PARSONS KANSAS 88220054 Jan 29 2014 2:58:19:303PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED.

01-29-2014 DISPJD 5 COMMERCIAL BANK OF PARSONS KANSAS 88220055 Jan 29 2014 2:58:19:513PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED.

01-29-2014 DISPJD 6 COMMERCIAL BANK OF PARSONS KANSAS 88220056 Jan 29 2014 2:58:19:783PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED.

01-29-2014 DISPJD 8 COMMERCIAL BANK OF PARSONS KANSAS 88220057 Jan 29 2014 2:58:19:943PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED.

01-29-2014 DISPJD 9 COMMERCIAL BANK OF PARSONS KANSAS 88220058 Jan 29 2014 2:58:20:173PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED.

01-29-2014 DISPJD 10 COMMERCIAL BANK OF PARSONS KANSAS 88220059 Jan 29 2014 2:58:20:263PM - $ 0.00

SELLERS, JEFFERSON D.: CASE CALLED FOR JURY TRIAL. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY PAUL TOM AND JIM BRYANT. DEFENDANT PRESENT AND REPRESENTED BY CHUCK GREENOUGH AND MICHAEL POLLARD. THE JURORS ARE CALLED AND SWORN TO THEIR QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE.

OPENING STATEMENTS ARE MADE. 3 WITNESSES SWORN. RULE WAS INVOKED. REPORTER LYNETTE QUETONE. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANT MOVES FOR A DIRECTED VERDICT AND IS SUSTAINED AT 11:15 AM. JURORS DISMISSED.

Plaintiff's Experts:

Defendant's Experts:

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