581 F.2d 698 (8th Cir. 1978), 77-1884, United States v. Porter

Docket Nº:77-1884.
Citation:581 F.2d 698
Party Name:UNITED STATES of America, Appellee, v. Raymond A. PORTER, Virginia R. Porter and Clifford B. Smith, Appellants.
Case Date:July 21, 1978
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 698

581 F.2d 698 (8th Cir. 1978)

UNITED STATES of America, Appellee,

v.

Raymond A. PORTER, Virginia R. Porter and Clifford B. Smith,

Appellants.

No. 77-1884.

United States Court of Appeals, Eighth Circuit

July 21, 1978

Submitted May 18, 1978.

Rehearing and Rehearing En Banc Denied Aug. 18, 1978.

Page 699

David M. Korum, Sestric, Karoh, LaBarge & Korum, Kirkwood, Mo., for appellant; Kent E. Karohl, Kirkwood, Mo., on the brief.

Joseph B. Moore, Asst. U. S. Atty., St. Louis, Mo., for appellee; Robert D. Kingsland, U. S. Atty., St. Louis, Mo., on the brief.

Before GIBSON, Chief Judge, HENLEY, Circuit Judge, and SCHATZ, District Judge. [*]

HENLEY, Circuit Judge.

In the fall of 1973 the Mercantile Bank of St. Charles County, Missouri, which was then known as the County Bank of St. Charles and which is hereinafter called the Bank, made a $250,000.00 loan to Kent Enterprises, Inc. of Clayton, Missouri, hereinafter referred to as Kent. Repayment of the loan to the extent of 90% Of principal and interest was guaranteed by the Small Business Administration (SBA), an agency of the United States.

In connection with its guaranty SBA made a number of requirements including requirements of guaranties from various persons and corporations who and which would become liable to SBA should the agency be required to comply with its own guaranty to the Bank. This case involves SBA's requirement that the loan be guaranteed to the extent of $25,000.00 by Raymond A. Porter and his wife, and to a like extent by Clifford B. Smith. Mr. Porter and Mr. Smith appear to have been shareholders in and directors of Kent. Other guaranties that will be mentioned were required and apart from the guaranties other requirements were made.

The Porters and Smith executed contract documents on October 18, 1973. The loan was actually closed on October 31. By the spring of 1975 the loan was in default to the extent of more than $200,000.00. SBA was required to honor its guaranty, and

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after it did so the Bank assigned to it the Bank's note and all rights thereunder including alleged rights against the Porters and Mr. Smith. By August, 1976 the amount due on the obligation was approximately $210,000.00, and in January, 1977 the government commenced this action against Mr. and Mrs. Porter and Mr. Smith, hereinafter called defendants, in the United States District Court for the Eastern District of Missouri. 1

The defendants answered in due course and denied liability. There was some discovery in the case, including the taking of the deposition of Oliver J. Miller, the President of the Bank. Thereafter both sides moved for summary judgment. The defendants supported their motion with their own affidavits.

The case was on the docket of Chief District Judge James H. Meredith, who assigned the cross motions for summary judgment to a United States Magistrate for consideration, report and recommendation as authorized by 28 U.S.C. § 636(b)(1)(B). In August, 1977 the Magistrate filed a full report which concluded with the recommendation that the government's motion for summary judgment be granted and that the motion of the defendants for such judgment be denied. That recommendation was accepted by Judge Meredith and a summary judgment in favor of the government was duly entered. This appeal followed.

I

In January, 1973 the Bank and SBA entered into an underlying agreement whereby the SBA agreed to guarantee, within limits, the repayment of certain loans made by the Bank provided that the Bank and the borrower complied with terms and conditions imposed by SBA.

Those terms and conditions might include requirements as to collateral and requirements that personal guaranties be forthcoming to protect the agency should it be required to honor its own guaranties. In the case of a corporate borrower personal guaranties might be required from key corporate personnel and their spouses and from other corporations with which the borrower was connected or affiliated. Private guarantors were expected to sign a printed SBA form entitled "Small Business Administration (SBA) Guaranty." That form provided, among other things:

. . . The Undersigned hereby grants to Lender full power, in its uncontrolled discretion and without notice to the undersigned, but subject to the provisions of any agreement between the Debtor or any other party and Lender at the time...

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