ARKANSAS POULTRY COOP., INC. v. Red Barn System, Inc.

• Decision Date: 28 December 1971
• Docket Number: No. F-71-C-4.,F-71-C-4.
• Parties: ARKANSAS POULTRY COOPERATIVE, INC., Plaintiff, v. The RED BARN SYSTEM, INC., Defendant.
• Court: U.S. District Court — Western District of Arkansas

335 F. Supp. 214

ARKANSAS POULTRY COOPERATIVE, INC., Plaintiff, v. The RED BARN SYSTEM, INC., Defendant.

No. F-71-C-4.

United States District Court, W. D. Arkansas, Fayetteville Division.

December 28, 1971.

Crouch, Blair, Cypert & Waters, Fayetteville, Ark., for plaintiff.

Levy & Craig, Kansas City, Mo., Wade, McAllister, Wade & Burke, Fayetteville, Ark., for defendant.

OPINION

JOHN E. MILLER, Senior District Judge.

On March 3, 1971, plaintiff, Arkansas Poultry Cooperative, Inc., a corporation, organized and existing under the laws of Arkansas, commenced this action against The Red Barn System, Inc., seeking to recover on a written guaranty executed by defendant on March 19, 1967, the sum of $17,776.09, with interest and costs.

On April 5, 1971, the defendant filed its motion to quash the return of service of summons, or in lieu thereof to dismiss the action on the ground "that the defendant is a corporation organized under the laws of the State of Ohio and was not and is not subject to service of process within the Western District of Arkansas." On June 24, 1971, the court, after a thorough consideration of the motion, found:

"The uncontroverted facts as disclosed by the affidavits and the entire record establish that the acts of the defendant are within the provisions of the Uniform Interstate and International Procedure Act, as construed by the Supreme Court of Arkansas in the case of Pennsalt Chemical Corp. v. Crown Cork & Seal Co., Inc., (1968) 244 Ark. 638, 426 S.W.2d 417, and the court is vested with personal jurisdiction over the defendant."

and overruled the motion of defendant. See, also, American Hoechst Corp. v. Bandy Laboratories, Inc., (W.D.Mo. 1971) 332 F.Supp. 241.

On July 26, 1971, following the overruling of the motion of defendant, it filed its answer in which it admitted executing the Guaranty Agreement, a copy of which was attached to plaintiff's complaint, and alleged that plaintiff breached the terms and conditions of the agreement "by failing to furnish defendant or any of its authorized representatives monthly duplicate statements in the manner more specifically described in the third paragraph of the Guaranty Agreement * * *; plaintiff further breached said agreement by failing to apply all payments received by it from Ollie's Chicken, Inc., against any liability * * *"; that the agreement was terminated by defendant herein prior to the time of the alleged indebtedness referred to in plaintiff's complaint, and denied that plaintiff has any claim against defendant.

There is complete diversity between the parties. The amount in controversy exceeds $10,000, exclusive of interest and costs, and therefore the court has jurisdiction of the parties and the subject matter. 28 U.S.C.A. § 1332(a).

The parties engaged in rather extensive discovery procedures through interrogatories and requests for admission of facts.

On November 9, 1971, plaintiff filed its motion for summary judgment pursuant to Rule 56(a), Fed.R.Civ.P., on the ground "that the pleadings and other matters filed herein reveal conclusively that there is no genuine issue as to any material fact and that plaintiff is entitled to a judgment as a matter of law."

On December 9, 1971, defendant filed its response to the motion, in which it alleged that the Guaranty Agreement is not absolute, and that there is a genuine issue of material fact as to whether notice of transactions was given by plaintiff to defendant, and further "assuming the Guaranty Agreement is absolute and unconditional, there is a genuine issue of material fact as to the amount of the alleged indebtedness due plaintiff from the principal debtor." Defendant further alleged that the "pleadings, plaintiff's exhibits, affidavits and counter-affidavits of Ralph C. Fox and Paul Boznango filed by defendant show that plaintiff is not entitled to a summary judgment."

In the consideration of a motion for summary judgment, the long-established rule is set forth in Walling v. Fairmont Creamery Co., (8 Cir. 1943) 139 F.2d 318, at page 322 where the court said:

"On a motion for a summary judgment the burden of establishing the nonexistence of any genuine issue of fact is upon the moving party, all doubts are resolved against him, and his supporting affidavits and depositions, if any, are carefully scrutinized by the court. The object of the motion is to separate the formal from the substantial issues raised by the pleadings, and the court examines evidence on the motion, not to decide any issue of fact which may be presented, but to discover if any real issue exists."

The parties have submitted briefs in support of their respective contentions and the motion is now ready for consideration and determination by the court.

Paragraph one of the Guaranty Agreement provides that defendant "unconditionally guarantees and promises on demand to pay Arkansas Poultry Cooperative, Inc., * * * all sums of money up to Sixty Thousand ($60,000.00) Dollars which may now or at any time hereafter be owed by Ollie's Chicken, Inc., of Kansas City, Missouri, to Creditor * * *, together with any and all interest, charges, fees, costs, and expenses, which may now or at any time hereafter be similarly owed in connection therewith, by reason of sales of chickens or other transactions between Creditor and the said Ollie's Chicken, Inc., of Kansas City, Missouri."

In paragraph 2 it is provided:

"The aforesaid obligation of Guarantor to Creditor is the inducement to Creditor to grant credit or assume a credit risk from time to time in respect of sales of chickens made by Creditor to Ollie's Chicken, Inc., of Kansas City, Missouri, and shall constitute a continuing guaranty and shall be revocable only as to transactions entered into by Creditor subsequent to the receipt by Creditor of a notice of termination sent by Guarantor by certified mail, which notice of termination may be sent by Guarantor at its option at any time."

Paragraph three provides:

"* * * Guarantor, without affecting liability hereunder in any respect consents to and waives notice of all changes of terms, the withdrawal or extension of credit, or time to pay, the release of the whole or any part of the indebtedness, the settlement or compromise of differences, the acceptance or release of security, the acceptance of notes, trade acceptances, or any other form of obligation for the aforesaid indebtedness, and the demand, protest, and notice of protest of such instruments or their endorsements."

The Guarantor "also consents to and waives notice of * * * anything whatsoever, whether or not herein specified which may be done or waived by or between the Creditor and Ollie's Chicken, Inc. * * *." That the Guarantor waives "notice of acceptance hereof and notice of orders, sales and deliveries to Ollie's Chicken, Inc., and of the amounts and terms thereof, except that Creditor shall furnish a monthly duplicate statement to Ralph C. Fox, Vice President, The Red Barn System, Inc., * * * showing the indebtedness of Ollie's Chicken, Inc., and of all defaults or disputes between Creditor and Ollie's Chicken, Inc. * * *."

Paragraph four provides:

"The obligation of the Guarantor hereunder is a primary and unconditional obligation and covers all existing and future indebtedness of Ollie's Chicken, Inc. to Creditor. This obligation shall be enforceable before or after proceeding against Ollie's Chicken, Inc. or against any security held by the Creditor and shall be effective regardless of the solvency or insolvency of Ollie's Chicken, Inc., at any time * * *."

On March 28, 1968, the defendant, by its Executive Vice President Ralph C. Fox, wrote plaintiff a letter in which he stated:

"This letter will constitute a notice of termination of guarantor under the terms of the Guaranty Agreement dated March 9, 1967. Effective the date of receipt of this notice of termination by you, the said Guaranty Agreement shall be considered null and void."

On May 21, 1968, Paul Boznango, President of Ollie's Chicken, Inc., wrote plaintiff enclosing three checks totaling $17,776.09. In the letter it was stated that the checks covered merchandise received in March, and "I will let you know when you can send them through the bank as we do not have enough in the bank to cover these checks at this time." On June 10, 1968, the defendant, through Mr. Fox, wrote plaintiff as follows:

"Several months ago we indicated our decision to terminate a certain credit agreement between you, ourselves, and Ollie's Chicken. According to our records, we have issued sufficient checks to cover the then outstanding balance at Ollie's.

"Will you please confirm the position that Red Barn System is no longer obligated to honor this guaranty, and that all the provisions of that certain agreement have been satisfied."

On June 17, 1968, the plaintiff replied to Mr. Fox thanking him for the letter of June 10, and stated:

"We did get a letter from you sometime ago telling us of your intentions of termination credit agreement between Ollie's Chicken, Red Barn System and ourselves. However, it has not been all paid as yet.

"We have in our possession three checks from Ollie's in Kansas City that would pay this account in full but the checks cannot be cleared by the bank. Mr. Boznango tells me he does not have sufficient funds to cover them. We would like nothing better than to have these cleared. We need our money.

"Until these checks are cleared or the account has been satisfied you still have an obligation as this product was purchased before the credit agreement was terminated."

On October 25, 1968, the plaintiff again wrote Mr. Fox calling his attention to the fact that the three checks had not been paid, and payment of the checks had been stopped on July 13, 1968. Plaintiff also urged the defendant to pay the account as it had "let it go as long as we possibly can." The three checks that have not been paid are set forth in the record.

The defendant in its brief,...