Court Opinion

ID: 9386986
Source: CourtListenerOpinion
Date Created: 2023-04-14 14:04:47.619029+00
Date Added: 2024-06-11T17:18:10.465846
License: Public Domain

RENDERED: APRIL 7, 2023; 10:00 A.M.
                        NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                         Court of Appeals

                            NO. 2021-CA-1517-MR

SARAH CORNETT                                                     APPELLANT

                APPEAL FROM FAYETTE CIRCUIT COURT
v.              HONORABLE ERNESTO SCORSONE, JUDGE
                       ACTION NO. 19-CI-03999

STUDENT LOAN SOLUTIONS, LLC,
SUCCESSOR IN INTEREST TO
BANK OF AMERICA, N.A.; PAMELA
S. PETAS; SARAH A. OKRZYNSKI;
THE LAW OFFICE OF SARAH A.
OKRZYNSKI, LLC; AND WILLIAMS
& FUDGE, INC.                                                      APPELLEES

                               OPINION
                         AFFIRMING IN PART,
                  VACATING IN PART, AND REMANDING

                                 ** ** ** ** **

BEFORE: CETRULO, DIXON, AND TAYLOR, JUDGES.

TAYLOR, JUDGE: Sarah Cornett brings this appeal from an October 6, 2021,

Order of the Fayette Circuit Court granting summary judgment in favor of Student
Loan Solutions, LLC, Successor in Interest to Bank of America, N.A. (Student

Loan Solutions), Williams & Fudge, Inc., the Law Office of Sarah A. Okrzynski,

LLC, Sarah A. Okrzynski, and Pamela S. Petas. We affirm in part, vacate in part,

and remand.

              This case involves a student loan made by Bank of America (Bank) to

Cornett in 2008 for the sum of $12,852 with interest of 8.248 percent. It is

undisputed that Cornett eventually defaulted by only making a partial payment on

May 5, 2014. As a result, the Bank accelerated the loan, thus making the full loan

balance due in September 2014. Cornett did not pay the loan balance, and the

Bank sought the services of a collection agency, Williams & Fudge. Eventually,

Student Loan Solutions acquired by assignment Cornett’s student loan from the

Bank, and the Law Office of Sarah A. Okrzynski was retained as counsel to assist

in collecting the student loan.

              On November 8, 2019, Student Loan Solutions filed an action in the

Fayette Circuit Court against Cornett. Therein, Student Loan Solutions alleged

that Cornett defaulted and breached the terms of her student loan agreement.

Student Loan Solutions sought to recover the “amount of $14,892.43, interest

accrued through May 22, 2019[,] in the amount of $274.94, with statutory post

judgment interest at the rate of 6.000% per annum from the date of judgment until

paid, reasonable attorney fees and court costs[.]” Complaint at 2.

                                        -2-
             Cornett filed an answer and specifically raised the affirmative defense

of the statute of limitations. Cornett also filed “counterclaims” against Student

Loan Solutions, Williams & Fudge, the Law Office of Sarah A. Okrzynski, LLC,

Sarah A. Okrzynski, and Pamela S. Petas. Therein, Cornett claimed that Student

Loan Solutions, Williams & Fudge, the Law Office of Sarah A. Okrzynski,

Okrzynski, and Petas (collectively referred to as appellees) violated both the Fair

Debt Collection Practices Act (FDCP), 15 United States Code (U.S.C.) § 1692-

1692 et seq. and the Kentucky Consumer Protection Act (KCPA), Kentucky

Revised Statutes (KRS) 367.110-367.300. Cornett sought compensatory damages,

punitive damages, and attorney’s fees.

             Eventually, Cornett filed a motion for partial summary judgment.

Cornett initially pointed out that she executed a Loan Request Credit Agreement

(Credit Agreement) to obtain the student loan. Cornett maintained that the Credit

Agreement contained a choice of law provision, and such provision clearly stated

California law would govern any disputes thereunder. Under California law,

Cornett maintained that an action for breach of an oral contract must be brought

within two years (California Civil Procedure (CCP) § 339) from accrual and that

an action for breach of a written contract must be brought within four years (CCP §

337) from accrual. Cornett argued that under either CCP § 339 or CCP § 337,

Student Loan Solutions’ action was time-barred. Additionally, Cornett cited to

                                         -3-
KRS 413.320 as also requiring the application of California’s shorter statute of

limitations. Alternatively, if Kentucky’s statute of limitations were applicable,

Cornett argued that KRS 413.120(1), which provided that an action for breach of a

contract not in writing to be brought within five years, was controlling. In

particular, Cornett argued that the essential terms of her student loan agreement

were not in writing:

                    Cornett signed a loan request for $20,000.00 from
             BoA [Bank of America, N.A.]. This request, dated March
             13, 2008, is the only loan document that Cornett signed.
             The request describes Cornett’s obligations if BoA
             offered her a loan and if she accepted the loan, but sets
             forth no definite terms agreed upon by the parties. . . .

             ....

             [T]he alleged note disclosure statement purports to show
             the terms of a loan. This single-paged document is
             unsigned, thus representing no written agreement, and is
             dated March 24, 2008, eleven days after the date of
             Cornett’s loan request. There is no evidence in this case
             that BoA ever sent the document to Cornett or that she
             ever received it, and the document does not meet
             minimum evidentiary requirements for admissibility,
             there being insufficient or no proof that the document is
             what SLS [Student Loan Solutions, LLC, Successor in
             Interest to Bank of America, N.A.] claims it to be.
             Additionally, the document (and/or its contents) violates
             the hearsay rule and falls under no recognized exception
             to that rule.

December 22, 2020, Motion for Partial Summary Judgment p. 12-13 (citations

omitted). As the agreement for the student loan was partly in writing and partly

                                         -4-
oral, Cornett believed Student Loan Solutions must have filed its breach of contract

claim within five years after her default. Cornett maintained that Student Loan

Solutions clearly failed to do so; thus, the instant action was time-barred.

             In its response, Student Loan Solutions argued that the Credit

Agreement’s choice of law provision, favoring California law, only applied to

substantive law and not to procedural law. Rather, Student Loan Solutions

maintained that the law of the forum (Kentucky) governed as to the statute of

limitations. Student Loan Solutions also maintained that the essential terms of the

contract were written. According to Student Loan Solutions, these terms were

expressed in the Credit Agreement and the Note Disclosure Statement. As a

written contract, Student Loan Solutions asserted that the fifteen-year limitation

period found in KRS 413.090 was controlling. Additionally, Student Loan

Solutions believed the cause of action did not arise in another state; rather, the

cause of action arose in Kentucky, rendering KRS 413.320 inapplicable.

             Thereafter, Student Loan Solutions filed a motion for summary

judgment. Student Loan Solutions argued that it was undisputed that Cornett

defaulted and breached her student loan agreement. Student Loan Solutions

maintained that the Kentucky’s fifteen-year statute of limitations for breach of

written contract (KRS 413.090) controlled, and its action was timely filed.

                                          -5-
Consequently, Student Loan Solutions asserted it was entitled to $15,167.37 plus

interest and $3,033.47 in attorney’s fees.

             Subsequently, appellees filed a motion for summary judgment upon

claims advanced by Cornett under the FDCP and KCPA. They argued that

Cornett’s claims were without merit because the breach of contract action was

timely filed under KRS 413.090. As to the Credit Agreement’s choice of law

provision stating that California law governed, appellees maintained that such

choice of law provision merely applied to substantive law and not procedural law.

They also asserted that the statute of limitations presented an issue of procedural

law, and the law of the forum state (Kentucky) was dispositive. Appellees further

believed that KRS 413.320 was inapplicable as the breach of contract claim

accrued in Kentucky.

             Cornett responded and maintained that she never received a copy of

the Note Disclosure Statement. Consequently, Cornett argued that the Note

Disclosure Statement could not be considered as part of the contract and that the

Credit Agreement did not contain all the essential terms of the contract. And, if the

Note Disclosure Statement were considered as part of the contract, Cornett

believes that essential terms were still lacking, thus necessitating parole evidence.

                                         -6-
            By order entered October 6, 2021, the circuit court denied Cornett’s

motion for summary judgment and granted appellees’ motions for summary

judgment. In so doing, the court reasoned:

            It is undisputed that [Cornett] executed and signed a
            student loan request credit agreement in the hope that
            Bank of America would provide her a student loan. The
            cause of action accrued in Kentucky because that is
            where [Cornett] applied for the loan, attended school,
            paid back part of the loan, and then defaulted on the loan.
            The student loan request credit agreement states that, “. .
            . the provisions of this credit agreement will be governed
            by federal law and the laws of the state of California . . .
            ,” but the Sixth Circuit has interpreted clauses such as
            that one to apply only to substantive law and not to
            procedural law[.]

                  ....

            The student loan request credit agreement did not contain
            all the terms of the agreement; the missing terms can be
            found in the note disclosure statement that [Cornett] says
            she never received. Assuming, arguendo, that [Cornett]
            never received the note disclosure statement (that was
            incorporated by reference into the student loan request
            credit agreement), the student loan request credit
            agreement still represents a definite promise to pay. . . .
            The student loan request credit agreement goes on to
            describe the procedure for cancelling the loan, requiring
            that if the loan’s terms (laid out in the credit agreement
            and the disclosure statement) do not meet the borrower’s
            expectations, the borrower may cancel the loan within 10
            days in writing and return the money. It is undisputed
            that [Cornett] never gave written notice that she was
            cancelling the loan, nor did she return the money. The
            Court does not accept [Cornett]’s argument that the 5-
            year statute of limitations for oral agreements applies in
            this case. Instead, the Court relies on the holding from

                                        -7-
               Lyons v. Moise’s Ex’r, 298 Ky. 858, 183 S.W.2d 493
               (1944). . . .

               In that case, as in this case, there existed a promise to
               pay, although the signed promise did not include the
               exact amount that would have to be repaid. In the
               present case it is undisputed that [Cornett] executed and
               signed the promise to pay. It is also undisputed that
               [Cornett] subsequently defaulted by failing to pay the
               amount owed. . . .

October 6, 2021, Order at 2-4. The circuit court awarded Student Loan Solutions a

total of $18,200.84.1 This appeal follows.

               To begin, summary judgment is proper where there exists no material

issue of fact and movant is entitled to judgment as a matter of law. Steelvest, Inc.

v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). All facts and

inferences therefrom are viewed in a light most favorable to the nonmoving party.

Id. Additionally, our review of a summary judgment is always de novo. Seiller

Waterman, LLC v. Bardstown Cap. Corp., 643 S.W.3d 68, 74 (Ky. 2022);

Cunningham v. Kroger Ltd. P’ship I, 651 S.W.3d 199, 202 (Ky. App. 2022).

               Cornett contends that the circuit court erred by rendering summary

judgment concluding that Student Loan Solution’s breach of contract claim was

not time-barred. In particular, Cornett argues that the circuit court erroneously

decided that KRS 413.320 did not require application of California’s statute of

1
  In particular, the circuit court awarded $15,167.37, including interest, and $3,033.47 in
attorney’s fees.

                                                -8-
limitation. Cornett maintains that the breach of contract action accrued in

California; thus, under KRS 413.320, the foreign jurisdiction’s statute of limitation

governs if it is shorter than Kentucky’s statute of limitation. Cornett points out that

California’s limitation periods are four years upon a written contract (CPP § 337)

and two years upon a nonwritten contract (CPP § 339). Whereas, Kentucky’s

limitation periods are fifteen years for a written contract (KRS 413.090) and five

years for a nonwritten contract (KRS 413.120). As California’s limitation periods

are shorter, Cornett argues that KRS 413.320 requires application of California’s

limitation periods. Cornett asserts that under either CPP § 337 or CPP § 339,

Student Loan Solutions’ action for breach of contract is time-barred, and the circuit

court erred by not so concluding.

             KRS 413.320 reads:

             When a cause of action has arisen in another state or
             country, and by the laws of this state or country where
             the cause of action accrued the time for the
             commencement of an action thereon is limited to a
             shorter period of time than the period of limitation
             prescribed by the laws of this state for a like cause of
             action, then said action shall be barred in this state at the
             expiration of said shorter period.

KRS 413.320 is commonly referred to as Kentucky’s borrowing statute. Abel v.

Austin, 411 S.W.3d 728, 735 (Ky. 2013); Stivers v. Ellington, 140 S.W.3d 599, 600

(Ky. App. 2004). Thereunder, when an action is filed in Kentucky, “the Kentucky

statute of limitations is controlling, unless the limitation period is shorter in the

                                           -9-
state where the action arose.” Stivers, 140 S.W.3d at 600 (citation omitted). It

must be stressed that KRS 413.320 only applies if the cause of action arose in

another state. Abel, 411 S.W.3d 736-37.

             To determine where an action arose pursuant to KRS 413.320, it has

been observed:

             The time when a cause of action arises and the place
             where it arises are necessarily connected, since the same
             act is the critical event in each instance. The final act
             which transforms the liability into a cause of action
             necessarily has both aspects of time and place. It occurs
             at a certain time and in a certain geographical spot.

             Id. at 51 (emphasis added). Because “when” a cause of
             action accrues is closely connected to “where” it accrues,
             knowing when the “final act” occurred that ripened the
             matter into a cause of action aids in ascertaining where
             the cause of action accrued.

Abel, 411 S.W.3d at 736 (quoting Helmers v. Anderson, 156 F.2d 47, 50 (6th Cir.

1946)). A breach of contract action is said to ripen or accrue at the time of its

breach – that is, the date of the “promised performance.” Finley v. Thomas, 107

S.W.2d 287, 288 (Ky. 1937); see also RONALD W. EADES, KENTUCKY LAW OF

DAMAGES § 12:14 (2022).

             In this case, Student Loan Solutions’ action arose or accrued when

Cornett breached the contract and failed to make timely payments. And, Cornett

was in Kentucky when she failed to make such timely payments, so we are

                                         -10-
compelled to conclude that the breach of contract action arose in Kentucky and that

KRS 413.320 is inapplicable.

             Cornett alternatively claims that the circuit court erroneously applied

the Kentucky fifteen-year statute of limitation applicable to a written contract

(KRS 413.090). Instead, Cornett argues that the five-year statute of limitation

(KRS 413.120) controls. Cornett maintains that the essential terms of the student

loan agreement were not reduced to writing. Cornett acknowledges that she signed

the Credit Agreement but points out that the Credit Agreement failed to set forth

the correct amount of the loan, the amount due monthly, or the loan origination fee.

Cornett also points out that she neither received a copy of nor signed the Note

Disclosure Statement. Consequently, Cornett believes the Note Disclosure

Statement cannot be viewed as part of the student loan agreement. Cornett further

argues that the Note Disclosure Statement should not be considered because:

                     The disclosure statement is unsigned and the
             maker unidentified. Student Loan Solutions identified no
             one with personal knowledge of the document or its
             contents when it was made. There is insufficient proof
             that the document is what Student Loan Solutions claims
             it is. [Kentucky Rules of Evidence] KRE 901. The
             disclosure statement and its contents also violate the
             hearsay rule and fall under no recognized exception to
             the rule. KRE 802 and KRE 805. Evidence offered in
             support of summary judgment must be admissible.
             Hubble v. Johnson, 841 S.W.2d 169, 171 (Ky. 1992).

                                        -11-
Cornett’s Brief at 15-16 (citations omitted). Therefore, Cornett asserts that the

five-year statute of limitation (KRS 413.120) controls, and it is undisputed that the

current action is time-barred thereunder.

             In Mills v. McGaffee, 254 S.W.2d 716 (Ky. 1953), the Supreme Court

was faced with the issue of whether the five-year limitation period for a nonwritten

contract or the fifteen-year limitation period for a written contract controlled. In

making this determination, the Supreme Court differentiated between a nonwritten

contract and written contract:

             [I]f the contract be partly oral and partly in writing or if a
             written agreement is so indefinite as to necessitate a
             resort to parol testimony to make it complete, the 5-year
             statute of limitations concerning ‘contracts not in writing’
             would be applicable just as though the contract had rested
             entirely in parol. 53 C.J.S., Limitations of Actions, § 68,
             p. 1030.

                    A written contract is one which is all in writing, so
             that all its terms and provisions can be ascertained from
             the instrument itself. 45 Words & Phrases, p. 605; 53
             C.J.S., Limitations of Actions, § 60, p. 1017. The cases
             generally hold that a written instrument which sets forth
             the undertaking of the persons executing it or discloses
             terms from which such an undertaking can be imported,
             and which shows the consideration for the undertaking,
             and which identifies the parties thereto, will be
             considered a contract in writing. See Annotation to 3
             A.L.R. 2d, Sec. 2, p. 812, et seq[.]

Mills, 254 S.W.2d at 717.

                                         -12-
             In this case, it is uncontroverted that the Credit Agreement was

reviewed and signed by Cornett. Relevant to this appeal, the Credit Agreement

specifically provided:

             By signing this Credit Agreement and submitting it to the
             Lender, I am requesting that you make this loan to me in
             an amount equal to the Loan Amount Requested plus any
             Loan Origination Fee described in Paragraph F of this
             Credit Agreement. If you approve this request and agree
             to make this loan, you will notify me in writing and
             provide me with a Disclosure Statement, as required by
             law, at the time the loan proceeds are disbursed. The
             Disclosure Statement is incorporated herein by reference
             and made a part hereof. The Disclosure Statement will
             tell me the amount of the loan which you have approved,
             the amount of the Loan Origination Fee, the other
             important information. I will let you know that I agree to
             the terms of the loan as set forth in this Credit Agreement
             and in the Disclosure Statement by doing either of the
             following: (a) endorsing or depositing the check that
             disburses the loan proceeds; or (b) using or allowing the
             loan proceeds to be used on my behalf without objection.
             Upon receipt of the Disclosure Statement, I will review
             the Disclosure Statement and notify you in writing if I
             have any questions. If I am not satisfied with the terms
             of my loan as disclosed in the Disclosure Statement, I
             may cancel my loan. To cancel my loan, I will give you
             a written cancellation notice within ten (10) days after I
             receive the Disclosure Statement. If loan proceeds have
             been disbursed, I agree that I will immediately return the
             loan proceeds to you, will not endorse any check which
             disburses the loan proceeds and will instruct the School
             to return any loan proceeds to you. . . .

Credit Agreement at 2.

                                        -13-
             The above provisions of the Credit Agreement are clear and

unambiguous. Thereunder, Cornett was informed that she would receive the

disclosure statement before distribution of the loan proceeds. Of import, the

disclosure statement was plainly incorporated by reference into the Credit

Agreement. Additionally, under the Credit Agreement, Cornett was deemed to

have accepted the terms of the disclosure statement if she endorsed and deposited

the loan check or utilized the loan proceeds. Cornett was also given the right to

cancel the loan. It is undisputed that Cornett utilized the loan proceeds and failed

to cancel the loan. Thus, by utilization of the proceeds from the student loan,

Cornett accepted the terms of the Note Disclosure Statement.

             As to Cornett’s evidentiary concerns regarding the Note Disclosure

Statement, the Note Disclosure Statement was filed with the affidavit of

Christopher Ruh, executive vice president of Williams & Fudge and general

manager of Student Loan Solutions. In his affidavit, Ruh stated that he had

“access to the business records relating to the student loan accounts that are

maintained in the ordinary course of business” and that he possessed “personal

knowledge of the operation of and the circumstances surrounding the preparation,

maintenance, and retrieval of [such] records.” Ruh Affidavit at 1-2. Thus, it

appears that the Note Disclosure Statement would be admissible under the business

records exception (Kentucky Rules of Evidence 803(6)) to the hearsay rule. See

                                         -14-
Augenstein v. Deutsche Bank National Trust Co., 647 S.W.3d 857, 861-62 (Ky.

App. 2021).

               Viewing the facts most favorable to Cornett, we believe the student

loan agreement constituted a written contract and that the fifteen-year limitation

period of KRS 413.090 controls. While it is true that the Credit Agreement did not

set forth the essential terms of the loan, the Credit Agreement coupled with the

Note Disclosure Statement did so. See Mills, 254 S.W.2d at 717. Therefore, we

conclude that the student loan agreement was a written contract, the fifteen-year

limitation period governs, and this action was timely filed.

               Cornett further asserts that the circuit court erred by rendering

summary judgment dismissing her claims under both the FDCP and the KCPA.

Specifically, Cornett maintains that appellees violated FDCP and KCPA by

sending her a collection letter dated June 26, 2019, demanding payment of

$18,959.21 to satisfy her student loan debt.2 Cornett points out that the sum of

$18,959.21 was incorrect and was $758.37 more than she, in fact, owed.

According to Cornett, the balance due was $15,167.37, including interest, and

$3,033.47 in attorney’s fees, for a total of $18,200.84, which represented the

amount actually awarded by the circuit court. Cornett argues that such a

2
 The collection letter was sent by the office of attorney Sarah A. Okrzynski on behalf of Student
Loan Solutions, LLC.

                                              -15-
misrepresentation of the actual amount owed constitutes a clear violation of both

the FDCP and KCPA.

             The record contains three affidavits relied upon by Student Loan

Solutions to establish the damages flowing from Cornett’s breach of the student

loan agreement – two affidavits of Ruh, as general manager of Student Loan

Solutions and as executive vice president of Williams & Fudge, and one affidavit

of Petas, as counsel employed in the law office of Sarah A. Okrzynski. In his

affidavits, Ruh averred that Cornett owed a total of $15,167.37 upon the student

loan. And, in her affidavit, Petas stated that the law office was retained on a 20

percent contingency fee arrangement and that the attorney fee due was $3,033.47,

which represented 20 percent of $15,167.37. So, Student Loan Solutions only

sought to recover a total of $18,200.84, and the circuit court, in fact, awarded such

sum.

             In its appellate brief, appellees fail to specifically explain the

difference between the amount sought by it in the collection letter ($18,959.21)

and the amount sought by it in the action below and ultimately awarded to it by the

circuit court ($18,200.84). Appellees did maintain that Cornett failed to file a

response to the motion for summary judgment upon her claims under the FDCP

and KCPA. As a result, appellees argue that Cornett waived any argument on

appeal.

                                          -16-
                 As to summary judgment, it is well-established that movant bears the

initial burden of demonstrating that no material issue of fact exists. Martin v.

Wallace, 651 S.W.3d 753, 756-57 (Ky. 2022). After the movant does so, the onus

is then on the nonmoving party to raise a material issue of fact to preclude

summary judgment. Id.

                 Here, the movants (appellees) failed to demonstrate that no material

issue of fact exists. Rather, the facts indicate that the collection letter demanded

$18,959.21 to satisfy the student loan debt, yet the actual outstanding amount owed

appears to be $18,200.84. A false statement as to the amount actually owed upon a

debt may constitute a violation of the FDCP and/or KCPA. 15 U.S.C. § 1692e;

Obduskey v. McMarthy & Holthus LLP, 139 S. Ct. 1029, 1036 (2019); KRS

367.170; Skilcraft Sheetmetal, Inc. v. Kentucky Machinery, Inc., 836 S.W.2d 907,

909 (Ky. App. 1992).3

                 Accordingly, we conclude that material issues of fact preclude

summary judgment on Cornett’s claims under the FDCP and KCPA and that the

circuit court erred by deciding otherwise. Upon all other issues presented by

Cornett, we affirm the circuit court.4

3
  Our Opinion should be only construed as holding that at this point in the proceeding and upon
the issues presented herein, summary judgment was improper and premature upon Sarah
Cornett’s claims under the Fair Debt Collections Practices Act and the Kentucky Consumer
Protection Act.
4
    We view any remaining contentions of error to be moot or without merit.

                                               -17-
            For the foregoing reasons, the Order of the Fayette Circuit Court is

affirmed in part, vacated in part, and remanded for proceedings consistent with this

Opinion.

            ALL CONCUR.

BRIEFS AND ORAL ARGUMENT                  BRIEF AND ORAL ARGUMENT
FOR APPELLANT:                            FOR APPELLEES:

James D. Decker                           Boyd W. Gentry
Lexington, Kentucky                       Beavercreek, Ohio

                                        -18-