IN THE DISTRICT COURT OF THE SECOND JUDICIAL DISTRICT COUNTY OF WEBER, STATE OF UTAH

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1 The Order of Court is stated below: Dated: June 23, 2014 /s/ Michael D DiReda 12:08:17 PM District Court Judge Marty E. Moore (#8932) PECK HADFIELD BAXTER & MOORE, LLC 399 North Main, Suite 300 Logan, Utah Telephone: (435) mmoore@peckhadfield.com Attorneys for First-Citizens Bank & Trust Company IN THE DISTRICT COURT OF THE SECOND JUDICIAL DISTRICT COUNTY OF WEBER, STATE OF UTAH FIRST-CITIZENS BANK & TRUST COMPANY, v. Plaintiff, RAKESHKUMAR A. PATEL and JYOTSNABEN P. PATEL, Defendants. FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER GRANTING PLAINTIFF S MOTION FOR SUMMARY JUDGMENT & DENYING DEFENDANTS COUNTER-MOTION FOR SUMMARY JUDGMENT Civil No Judge Michael DiReda June 23, :08 PM 1 of 9

2 This matter came before the Court for hearing on April 16, 2014, and an oral ruling by teleconference on April 29, 2014, on Plaintiff s Motion for Summary Judgment dated November 6, 2013, Defendants Counter-Motion for Summary Judgment dated March 19, 2014 and Plaintiff s Motion to Strike Portions of Declaration of Rakeshkumar A. Patel in Response to Plaintiff s Motion for Summary Judgment and in Support of Defendants Counter-Motion for Summary Judgment dated March 27, Each motion was accompanied by a supporting memorandum of authorities from its proponent and opposed by a memorandum of authorities submitted by the opponent(s). In addition, the summary judgment motions were supported by multiple exhibits, including affidavits. Requests to submit for decision pursuant to Rule 7(d), U.R.Civ.P., were filed for each of the motions before the April 16, 2014 hearing. After reviewing the pleadings, the motions, the supporting and opposing memoranda, the exhibits submitted by the parties and hearing detailed arguments of counsel, the Court makes the following: FINDINGS OF FACT 1. In July 2008, Sikotarmaa, LLC ( Sikotarmaa ) borrowed $2,721, from the Temecula Valley Bank (the First Loan ). 2. In July 2008, Sikotarmaa, LLC borrowed $1,564, from the Temecula Valley Bank (the Second Loan ). 1 Defendants counter-motion was submitted pursuant to this Court s Order on Stipulation to File an Amended Answer and Submit Amended Reply to Plaintiff s Motion for Summary Judgment entered January 27, June 23, :08 PM 2 of 9

3 3. Defendant Rakeshkumar Patel owns a 36% interest in Sikotarmaa. 4. Defendant Jyotsnaben Patel owns a 30% interest in Sikotarmaa. 5. Both Defendant Rakeshkumar Patel and Defendant Jyotsnaben Patel signed documents entitled Commercial Guaranty, whereby each personally and unconditionally guaranteed payment of the promissory notes for the First Loan and Second Loan. 6. After the failure of the Temecula Valley Bank, the Federal Deposit Insurance Corporation (FDIC) assigned all documents from the First Loan and the Second Loan to First-Citizens Bank. 7. First-Citizens Bank is the current holder of the promissory notes underlying the First Loan and the Second Loan and the commercial guaranties at issue in this lawsuit. 8. Sikotarmaa defaulted on its obligations under the First Loan and the Second Loan in In March 2013, Sikotarmaa filed a chapter 11 petition in the Bankruptcy Court for the District of Utah. 10. In the bankruptcy proceedings, Sikotarmaa proposed a Chapter 11 reorganization plan that was opposed by First-Citizens Bank at an evidentiary hearing conducted by the Bankruptcy Court on November 26, On December 3, 2013, the Bankruptcy Court ruled that it would accept a modified chapter 11 plan submitted by Sikotarmaa. 3 June 23, :08 PM 3 of 9

4 12. On December 23, 2013, the Bankruptcy Court confirmed the Chapter 11 bankruptcy plan submitted by Sikotarmaa, as modified. 13. Although it calls for full payment to First-Citizens Bank, Sikotarmaa s Chapter 11 plan confirmed by the Bankruptcy Court is less favorable to First-Citizens Bank than the original terms of the First Loan and the Second Loan. 14. In August 2013, First-Citizens Bank commenced the current action against Defendants on the commercial guaranties. 15. In support of its summary judgment motion, First-Citizens Bank argues that Sikotarmaa s Chapter 11 bankruptcy plan cannot affect the Defendants obligations under the commercial guaranties. 16. In support of its counter-motion, Defendants argue that this Court should apply equitable remedies to deny First-Citizens Bank s summary judgment motion including the equitable remedies of estoppel, unilateral mistake, and unconscionability. 17. First-Citizens Bank s Plaintiff s Motion for Summary Judgment should be granted and Defendants Counter-Motion for Summary Judgment should be denied for the following reasons: (a) As guarantors, Defendants are not relieved of their obligations under the commercial guaranties to First-Citizens Bank by Sikotarmaa s Chapter 11 bankruptcy plan. (b) By the plain language of the commercial guaranties, Defendants waived the June 23, :08 PM 4 of 9

5 equitable defenses they have raised in this lawsuit. (c) The changes in Sikotarmaa s obligations under the First Loan and the Second Loan were made by order of the Bankruptcy Court, not by agreed-upon modification by the parties. (d) The Court has considered all four elements necessary to prove Defendants claim of equitable estoppel and finds that there are no facts to support the third and fourth elements of this claim, that is, that Defendants were ignorant of the true facts and that defendants relied on the conduct of First-Citizens Bank s conduct to their own injury. (e) The Court has considered all four elements necessary to prove Defendants claim of unilateral mistake and finds that there are no facts to support the first and fourth elements of this claim, that is, that Defendants mistake must be of so grave a consequence that to enforce their obligations under the commercial guaranties would be unconscionable and that it must be possible to give relief by way of rescission without serious prejudice to First-Citizens Bank except for the loss of its bargain. (f) The commercial guaranties signed by Defendants were separate transactions apart from the underlying loan transactions entered into by Sikotarmaa. (g) Defendants claims of waiver, novation, and release were not raised in their Amended Answer and the modifications to the terms of the First Loan and the Second Loan were made by a court-ordered confirmation of Sikotarmaa s Chapter 11 plan, not by 5 June 23, :08 PM 5 of 9

6 an arms-length agreement between the parties. 18. By stipulation of the parties, Defendants obligations to First-Citizens Bank under the commercial guaranties total $4,278,705.82, as of May 8, This sum includes payments made by Sikotarmaa to First-Citizens Bank under the chapter 11 plan confirmed by the Bankruptcy Court and attorneys fees and costs incurred by First- Citizens Bank since confirmation of the chapter 11 plan. CONCLUSIONS OF LAW 19. This matter is properly before the Court on cross-motions for summary judgment filed by the parties. 20. There are no genuine issues of material fact that would prevent this Court from deciding the cross-motions for summary judgment. 21. Defendants, as guarantors of Sikotarmaa s obligations under the First Loan and the Second Loan, are not relieved of their obligations to First-Citizens Bank under the commercial guaranties each of them signed in U.S.C. 524(e) provides that a discharge of Sikotarmaa, as debtor in a chapter 11 bankruptcy proceeding, does not affect Defendants defaults as guarantors of the loans modified in chapter 11 proceedings, and defendants have cited no cases to the contrary. 23. Although Defendants arguments in favor of the imposition of equitable remedies in this lawsuit are very appealing, Defendants have provided no case law to the June 23, :08 PM 6 of 9

7 Court to support those propositions, and the Court declines to create new law in this matter. 24. Plaintiff s Motion for Summary Judgment should be granted, Defendants Counter-Motion for Summary Judgment should be denied, and judgment should be entered forthwith in the amount of $4,278, in favor of First-Citizens Bank against Defendants Rakeshkumar Patel and Jyotsnaben Patel, jointly and severally. 25. Under the express terms of the commercial guaranties, the judgment may be augmented to account for attorneys fees and costs incurred by First-Citizens Bank in its efforts to collect on the judgment. 26. In accordance with Utah Code Ann , the judgment must be reduced after judicial or nonjudicial foreclosure of the Comfort Inn Suites property in Farr West, Utah currently owned by Sikotarmaa, LLC to offset the fair market value of the Sikotarmaa motel property at the time of the foreclosure sale. 27. In light of this Court s findings of fact and conclusions of law, Plaintiff s Motion to Strike Portions of Declaration of Rakeshkumar A. Patel in Response to Plaintiff s Motion for Summary Judgment and in Support of Defendants Counter-Motion for Summary Judgment is moot, therefore, should be denied. ORDER Accordingly, it is hereby ORDERED, ADJUDGED and DECREED that A. Plaintiff s Motion for Summary Judgment is hereby GRANTED and 7 June 23, :08 PM 7 of 9

8 judgment in the amount of $4,278, should be entered in favor of First-Citizens Bank. B. Defendants Counter-Motion for Summary Judgment is hereby DENIED. C. Plaintiff s Motion to Strike Portions of Declaration of Rakeshkumar A. Patel in Response to Plaintiff s Motion for Summary Judgment and in Support of Defendants Counter-Motion for Summary Judgment is hereby DENIED. Approved As To Form: /s/ Steven R. Bailey Steven R. Bailey Attorney for Defendants Electronically DATED, SIGNED, and ENTERED BY THE COURT, as shown at the top of this Order. * * * * End of Findings of Fact, Conclusions of Law, and Order Granting Plaintiff s Motion for Summary Judgment and Denying Defendants Counter-Motion for Summary Judgment * * * * June 23, :08 PM 8 of 9

9 CERTIFICATE OF SERVICE I hereby certify that on this 5 th day of June 2014, pursuant to Rule 5(b)(1)(A)(i) of the Utah Rules of Civil Procedure, a true and correct copy of the foregoing FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER GRANTING PLAINTIFF S MOTION FOR SUMMARY JUDGMENT & DENYING DEFENDANTS COUNTER-MOTION FOR SUMMARY JUDGMENT has been served upon all parties and/or attorneys with electronic filing accounts by submitting the same for electronic filing with the Court through Green Filing, LLC. Parties or attorneys without electronic filing accounts will be served with a true and correct copy of the foregoing FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER GRANTING PLAINTIFF S MOTION FOR SUMMARY JUDGMENT & DENYING DEFENDANTS COUNTER-MOTION FOR SUMMARY JUDGMENT by or by mailing via the United States Postal Service, postage pre-paid, at the addresses listed below: Steven R. Bailey 2454 Washington Blvd. Ogden, UT X Electronic Filing U.S. Mail service service Trevor Osborn 2909 Washington Blvd. Suite 101 Ogden, UT X Electronic Filing U.S. Mail service service /s/ Mindy Ford 9 June 23, :08 PM 9 of 9