Kovian v. Fulton County National Bank and Trust Co.

Stephen Barker and Alfred Cheney (plaintiffs) founded Hibjay Corporation (plaintiff) to renovate low-income properties for resale. Hibjay obtained loans from Fulton County National Bank (the bank) (defendant) to fund the renovation projects. At one point, Hibjay began renovating a temple owned by Kenneth Keith, who had originally purchased the building with money borrowed from the bank. Bank officials told Barker and Cheney that the bank would find a buyer for the renovated building. The eventual buyer, Temple Associates, evicted Hibjay from the building. Hibjay filed a mechanic’s lien against Temple Associates for nearly $616,000. Bank officials then tried to coerce Barker and Cheney into assigning the mechanic’s lien to the bank by threatening to withhold any future lending to Hibjay and to call in all existing loans. Hibjay assigned the lien to the bank in response to the threats. The bank foreclosed on Keith’s mortgage for the temple building and collected on the mechanic’s lien, but the bank refused to refund any money to Hibjay on the lien unless Barker and Cheney agreed to sign a release waiving all claims that Barker, Cheney, or Hibjay might have against the bank. The release also provided that Hibjay, Barker, and Cheney would be released from any liability with respect to the promissory notes and associated guaranties. Barker and Cheney signed the bank’s requested release. However, over two years later, Barker, Cheney, Hibjay, and others (plaintiffs) sued the bank and bank officials (defendants) for fraud and allegedly illegal banking activities. The bank’s president moved for summary judgment, asserting that the release signed by Barker and Cheney prevented the lawsuit. Barker and Cheney asserted that the release was void because the bank had induced Barker and Cheney to sign the release through duress. The bank’s president argued that the release was valid and that, even if duress was present, Barker and Cheney had ratified the release by accepting the benefit of being released from liability on the promissory notes.