Background
In 2021, Nicholas and Spring Slowik contracted with Adam Miller Homes, LLC to build a house in Villa Hills, Kentucky, at an estimated cost of $576,889. After a $15,000 down payment, the Slowiks financed the remainder through a construction loan with Guardian Savings Bank. Under the loan arrangement, Miller Homes submitted draw requests upon completing key project benchmarks, Guardian conducted inspections to verify progress, and checks were issued to the Slowiks — who then co-signed them over to the builder. The Slowiks did not retain a project manager or homeowner’s representative to oversee construction.
Miller Homes experienced persistent delays throughout the project. Between June 2021 and March 2022, Guardian issued three draw checks totaling approximately $484,000, each of which the Slowiks endorsed over to the builder despite ongoing delays. By mid-2022, disputes over change orders led the Slowiks to terminate Miller Homes, even after the builder offered to complete the home for the approximately $78,000 remaining in the loan account. The Slowiks hired a new builder and paid out those remaining funds. They then sued Guardian for breach of contract and fraudulent misrepresentation.
The Kenton Circuit Court granted summary judgment to Guardian on April 1, 2025. The Slowiks appealed, though their appellate brief contained no legal citations — which the court noted was a significant procedural deficiency, declining nonetheless to strike the brief given that the Slowiks did cite to the record.
The Court’s Holding
The Court of Appeals affirmed summary judgment on the breach of contract claim, finding that Guardian’s inspection and disbursement guidelines were internal procedural documents, not promises made to the Slowiks. The loan agreement expressly reserved Guardian’s right to waive those procedures at any time, and the underlying relationship was a standard creditor-debtor arrangement — not a fiduciary one. Because Guardian met all of its contractual obligations and the loan agreement contained no intent to create a fiduciary duty, no breach occurred. The court further noted that any damages suffered by the Slowiks were self-inflicted, stemming from their decision to reject Miller Homes’ offer to complete the project and hire a costlier replacement builder.
The court also affirmed summary judgment on the fraudulent misrepresentation claim. Guardian’s draw disbursements were tied to major project benchmarks — foundation, roof and windows, framing and drywall, and final completion — not to individual line-item components. The inspection reports the Slowiks characterized as fraudulent were internal working documents never intended as assurances to the borrowers. Critically, Mr. Slowik was unable to identify a single specific fraudulent misrepresentation by Guardian when questioned under oath, and the complaint itself failed to identify one. Guardian also obtained a sworn builder’s affidavit and photographic evidence for each draw, satisfying its documentation obligations.
Key Takeaways
- A bank administering a construction loan occupies a creditor-debtor role, not a fiduciary one; internal disbursement guidelines and inspection procedures do not become contractual promises to the borrower unless the loan agreement expressly says so.
- A borrower who co-signs draw checks over to a builder despite known project delays, then terminates the builder and incurs higher costs with a replacement, cannot shift those self-inflicted losses to the lender.
- A fraudulent misrepresentation claim fails where the plaintiff cannot identify any specific false statement — here, the lead plaintiff was unable to name a single misrepresentation under oath.
- Appellate briefs that contain no legal citations risk being stricken; Kentucky RAP 32(A)(4) requires argument with citations of authority, particularly for pure questions of law reviewed de novo.
Why It Matters
This decision reinforces the well-settled Kentucky rule that construction lenders are not insurers or fiduciaries of their borrowers. Lenders may structure draw procedures to protect their collateral interest without those procedures becoming enforceable promises that the project will be completed to the borrower’s satisfaction. Attorneys advising homeowners entering construction loan arrangements should counsel clients to retain independent oversight — a project manager or homeowner’s representative — rather than relying on the bank’s inspection process as a proxy guarantee of contractor performance.
The case also serves as a cautionary tale on appellate practice: submitting a brief with no legal authority in a purely legal appeal drew pointed criticism from the court, and only the presence of record citations spared counsel from having the brief stricken entirely.