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Western Energy Partners, LLC v. New Energy Co.

January 31, 2007

WESTERN ENERGY PARTNERS, LLC, PLAINTIFF,
v.
NEW ENERGY CO., LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Judge Smith

Magistrate Judge Abel

OPINION AND ORDER

This matter is before the Court on Plaintiff Western Energy Partners, LLC's Motion for Partial Judgment on the Pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure (Doc. 23). Plaintiff asserts that Defendants New Energy Company, LLC, Edward L. Presley, and Everett E. Gustin have admitted liability and damages as to Plaintiff's First Claim for Relief -- Enforcement of Promissory Note.*fn1 For the reasons that follow the Court GRANTS Plaintiff's Motion.

I. Facts

For purposes of ruling on Plaintiff's Motion for Partial Judgment on the Pleadings, the Court accepts as true the well-pleaded facts set forth in the Complaint.

Plaintiff Western Energy Partners, LLC ("Western Energy") is a limited liability company formed under the laws of the State of Ohio, with its principal place of business in Columbus, Ohio.

Defendant New Energy Co., LLC ("New Energy") is a limited liability company formed under the laws of the State of Wyoming, with its principal place of business located in Sheridan, Wyoming. Defendant Edward L. Presley is the principal owner, member, and operations manager of New Energy and a resident of the State of Wyoming. Defendant Everett E. Gustin has a financial interest in New Energy and is a resident of the State of Nevada.

The complaint alleges that Western Energy contracted with New Energy for the development and operation of natural gas and oil wells in the western United States. Western Energy provided the working capital to New Energy in the amount of $250,000.00, which was evidenced by a Cognovit Promissory Note dated December 3, 2001 (the "Note"). There was also an additional investment in the amount of $1.7 million for the exploration, development, and operation of the wells. In return, New Energy agreed that it would explore, develop, and operate ten wells. The obligations of New Energy pursuant to the Note were unconditionally guaranteed in writing signed by Defendants Presley and Gustin.

The Note specifically provided for New Energy to pay interest quarterly at the rate of 6.5% per annum beginning on June 30, 2002. New Energy failed to make the required interest payments on June 30, 2002 and September 30, 2002. New Energy has not repaid any indebtedness evidenced by the Note. Therefore, pursuant to Section 4.01 of the Note, Western Energy claims that an Event of Default has occurred and therefore, the Note is in default. Pursuant to Section 4.01 of the Note, upon the occurrence of an Event of Default, Western Energy may declare the entire principal amount evidenced by the Note and all accrued interest and other charges evidenced by the Note to be immediately due and payable. Western Energy has exercised its right to declare all such indebtedness immediately due and payable. (Compl. ¶13-14, 16-17).

Section 4.01 of the Note further provides that upon default, New Energy shall pay Western Energy all costs and expenses incurred by Western Energy in collecting the indebtedness evidenced by the Note, including reasonable attorney's fees. Therefore, Western Energy initiated this Complaint seeking to recover from New Energy $250,000.00, plus interest as specified in the Note, plus costs and expenses incurred in collecting such indebtedness. Western Energy asserts that the Defendants have admitted liability and damages as to the first claim for relief and therefore seek a judgment on the pleadings on that claim. After Plaintiff's Motion was filed and before any response was filed by Defendants, a mediation was held and judgment was entered against Defendants NEC and Presley. It was agreed by the parties that the judgment would have no effect upon any rights that Western Energy might have against Defendant Gustin or any defenses that Gustin might have against the claims of Western Energy.

After the agreed judgment, efforts were made to satisfy the judgment. The discovery with Defendant Gustin and his response the Motion to Dismiss were therefore placed on hold. Eventually, Western Energy executed on the judgment against Defendants Presley and NEC. Presley and NEC then filed for bankruptcy protection. With claims still pending against Defendant Gustin, Western Energy consented to Gustin filing a response to the Motion to Dismiss. The Motion is now ripe for review.

II. Motion to Dismiss

The standard of review for a motion for judgment on the pleadings under Fed. R. Civ. P. 12(c) is the same as that used to address a motion to dismiss under Fed. R. Civ. P. 12(b)(6). A motion to dismiss for failure to state a claim "should not be granted unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief."

Conley v. Gibson, 355 U.S. 41, 45-46 (1957). All well-pleaded allegations must be taken as true and be construed most favorably toward the non-movant. Schuer v. Rhodes, 416 U.S. 232, 236 (1974). A 12(b)(6) motion to dismiss is directed solely to the complaint and any exhibits attached to it. Roth Steel Products v. Sharon Steel Corp., 705 F.2d 134, 155 (6th Cir. 1983). The merits of the claims set forth in the complaint are not at issue on a motion to dismiss for failure to state a claim. Consequently, a complaint will be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) only if there is no law to support the claims made, or if the facts alleged are insufficient to state a claim, or if on the face of the complaint there is an insurmountable bar to relief. See Rauch v. Day & Night Mfg. Corp., 576 F.2d 857, 858 (6th Cir. 1976). Rule 12 (b)(6) must be read in conjunction with Fed. R. Civ. P. 8(a) which provides that a pleading for relief shall contain "a short and plain ...


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