Ford Motor Credit Co. v. Milburn

• Decision Date: 09 April 1980
• Docket Number: No. 77-1935,77-1935
• Citation: 615 F.2d 892
• Parties: FORD MOTOR CREDIT COMPANY, Plaintiff-Appellant, v. R. Kenneth MILBURN and Jane B. Milburn, Husband and Wife; and Bobby J. Rogers and Marilyn A. Rogers, Husband and Wife, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 892

615 F.2d 892

FORD MOTOR CREDIT COMPANY, Plaintiff-Appellant, v. R. Kenneth MILBURN and Jane B. Milburn, Husband and Wife; and Bobby J. Rogers and Marilyn A. Rogers, Husband

and Wife, Defendants-Appellees.

No. 77-1935.

United States Court of Appeals, Tenth Circuit.

Argued March 14, 1979.

Decided Feb. 8, 1980.

Rehearing Denied April 9, 1980.

Thomas G. Marsh of Dyer, Powers, Marsh, Turner & Powers, Tulsa, Okl., for plaintiff-appellant.

Robert K. McCune, Oklahoma City (Gene Stipe, Oklahoma City, with him on the brief), of Stipe, Gossett, Stipe & Harper, Oklahoma City, Okl., for defendant-appellee Jane B. Milburn.

W. Rodney DeVilliers, Sr., of DeVilliers & DeVilliers, Oklahoma City, Okl., submitted a brief for defendants-appellees Bobby J. Rogers and Marilyn A. Rogers.

Before SETH, Chief Judge, LOGAN, Circuit Judge and MILLER, Judge ^*.

LOGAN, Circuit Judge.

This is an appeal by Ford Motor Credit Company (Ford Credit) urging reversal of the trial court's denial of Ford Credit's motions for judgment notwithstanding the verdicts. Ford Credit brought a diversity action against R. Kenneth Milburn, Jane B. Milburn, Bobby J. Rogers and Marilyn A. Rogers to recover on personal guaranties of indebtedness owed to Ford Credit by Ken Milburn Ford, Inc. The trial court directed a verdict in favor of Ford Credit and against Kenneth Milburn, but sent the case to the jury as to the other defendants. After the jury reached verdicts exonerating Jane Milburn and the Rogerses of any liability, Ford Credit moved for judgment notwithstanding each verdict. The trial court denied the motions; the issues on appeal concern the propriety of these rulings.

It is undisputed that on November 26, 1968, Ford Credit and Ken Milburn Ford, Inc., (the dealership or Dealer), of which Kenneth Milburn was then the sole shareholder, entered into an agreement whereby Ford Credit made a $150,000 capital loan to Dealer. In addition to other contracting documents, a continuing guaranty was executed by Kenneth Milburn and Jane Milburn. The written guaranty provided that each personally guaranteed payment of "all Dealer's present and future obligations to" Ford Credit.

In 1971 the dealership's doors were locked by the Internal Revenue Service for failure to pay withholding taxes, and Ford Credit suspended its credit line. To reopen, the Dealer sought and acquired a loan from the First National Bank of Davis, Oklahoma, guaranteed by the Small Business Administration. In connection with this loan Ford Credit reopened a $300,000 line of credit to the dealership, and Bobby Rogers and Marilyn Rogers signed a continuing guaranty, identical to that previously signed by the Milburns, personally guaranteeing the dealership's obligations to Ford Credit.

Operations then resumed; but the dealership's financial situation apparently deteriorated. By letters of July 12, 1974, Ford Credit advised each of the guarantors that payment of $403,693.10 was demanded from Dealer and from them as guarantors of Dealer's obligations to Ford Credit. On July 1, 1975, Dealer filed a Chapter X Reorganization proceeding and was thereafter adjudicated a bankrupt. At the time of trial the remaining indebtedness to Ford Credit was $117,928.25, the amount Ford Credit sought to obtain from the individual guarantors.

In reviewing the trial court's denial of the motions for judgment n. o. v., we are mindful of the limitations upon judicial intrusion into the jury's realm as fact finder. We must view the evidence and inferences therefrom in the light most favorable to the parties for whom the jury found. Barnett v. Life Ins. Co. of the Southwest, 562 F.2d 15, 17 (10th Cir. 1977). The trial court's denial of the motions is error only if "there is no evidence or dispute or the evidence, although in conflict, is of such a conclusive nature that if a verdict were reached in favor of the party, judicial discretion would require that it be set aside." Continental Oil Co. v. Natrona Serv., Inc., 588 F.2d 792, 800 (10th Cir. 1978).

In this case, it is undisputed that defendants-appellees each signed the continuing guaranty and that Dealer owed Ford Credit $117,928.25. Therefore, unless defendants-appellees interposed defensive evidence sufficient to create a jury question, the trial court erred in its rulings.

I

Jane Milburn asserted a defense of fraud in the inducement of the guaranty contract. Viewed most favorably to her, the evidence shows that on November 26, 1968, Robert C. Bailey, an attorney representing Ford Credit, James Waugaman, then Branch Manager of Ford Credit, T. Fred Collins, an attorney representing Kenneth Milburn and the dealership, and Kenneth Milburn, met in Collins' office in Ardmore, Oklahoma, for the purpose of closing the $150,000 capital loan to the dealership. Much of the day was spent curing a real estate title problem; the actual closing occurred in the afternoon. In connection with the loan the Milburns signed the continuing guaranty. The evidence shows that Jane Milburn was not present in the office except for an appearance of approximately five minutes to sign the guaranty. At trial, Mrs. Milburn related the circumstances surrounding her signing as follows:

A I went down to Fred Collins' office, an attorney in Ardmore, and present were Jim Waugaman with Ford Motor Credit and an attorney from Oklahoma City, representing Ford Motor Credit, and Mr. Collins and my husband. And they laid all these books out in front of me and I said, "Now, look, gentlemen, before I sign anything I want it made perfectly clear that I am not obligating . . . myself for anything but this one loan and this one loan only," and I looked at Mr. Waugaman and I said, "Is that right, Jim?" and he said, "It's all right for you to sign, that's all right."

Q What did Mr. Waugaman tell you concerning your liabilities if you signed that document, before you signed it?

A He said, "It's all right for you to sign it. Go ahead and sign it. You are just pledging yourself for this one loan."

Ken Milburn supported her testimony in the following manner:

Q Would you tell the Court and jury what your wife what Mr. Waugaman told your wife there that day before she would sign the papers in this blue folder.

A And she said, "Now, Jim, I want you and everyone here to understand that I am signing for this $150,000 loan and this $150,000 loan only."

Q And what did Mr. Waugaman tell her?

A Mr. Waugaman said, "Jane, or Mrs. Milburn" probably called her Mrs. Milburn "we understand and it's perfectly all right for you to go ahead and sign."

Q All right.

A And everyone else in attendance nodded their head in agreement.

Mrs. Milburn thus claims that Ford Credit, through Waugaman and Bailey, fraudulently induced her into guaranteeing all present and future obligations of the dealership by misrepresenting the extent of her obligation under the guaranty agreement notwithstanding the clarity of the agreement as a continuing guaranty.

We are bound to follow Oklahoma law here. That state recognizes the rule that misrepresentations of law do not form the predicate for an action based on fraud. E. g., Nesbitt v. Home Federal Sav. & Loan Ass'n, 440 P.2d 738 (Okl.1968); Gibson v. Mendenhall, 203 Okl. 558, 224 P.2d 251 (1950). Under the Oklahoma decisions we think Waugaman's statement clearly would be regarded as a misrepresentation of law. See First Nat'l Bank & Trust Co. v. Muskogee Discount House, 382 P.2d 137 (Okl.1963).

There are exceptions to this rule, however, see id., 382 P.2d at 139, and one arguably applies to this case. If the person making the misrepresentation "has superior means of information, professes a knowledge of the law, and thereby obtains an unconscionable advantage of another who is ignorant and has not been in a situation to become informed, the injured party is entitled to relief . . . ." White v. Harrigan, 77 Okl. 123, 186 P. 224, syl. 1 (1919). See Nesbitt v. Home Federal Sav. & Loan Ass'n, 440 P.2d 738, 743 (Okl.1968) (recognizing the rule and the exception, but holding facts did not support claim to exception).

Even if we assume that Jane Milburn was generally inexperienced and ignorant concerning business affairs and the nature of a continuing guaranty, the exception would not apply here if she was in a position to become informed through her attorney. The only evidence supporting her assertion that she was not represented by an attorney at the time she signed the guaranty is the following testimony of Collins:

Q And, Mr. Collins, before we get into the documents, let me ask you, sir, during 1968 and years prior, did you have occasion to be the attorney for the Ken Milburn Ford, Inc.?

A Yes, sir.

Q And have you, during that time also, represented R. Kenneth Milburn?

A Yes, sir.

Q And were you also not the attorney, from time to time, for Jane B. Milburn?

A Yes, sir.

Q And she is the wife of Kenneth Milburn?

A Yes, sir.

Q All right. Directing your attention to November of 1968, specifically November 26, 1968, did you have occasion to participate in a capital loan closing?

A Yes, sir.

Q In your office?

A Yes, sir.

Q Who were you representing, Mr. Collins?

A I was representing Ken Milburn Ford and Ken Milburn and I can't say that I was representing Jane B. Milburn, although Mr. Milburn employed me. She was with Mr. Milburn right through this and those papers were filed were prepared so that Mrs. Milburn was to sign them.

Q Yes, sir. And did you represent Ken Milburn at the closing?

A Yes, sir.

Q And I will ask you one more time, Mr. Collins, were you not also representing Mrs. Milburn at this closing?

A I can't say that I was employed by Mrs. Milburn per se to represent her. I took the position that I was representing Mr. Milburn; that Ford Motor that Ken Milburn Ford, Inc. and Mrs. Milburn's name was there her name had been typed in on the instruments for her to sign. I can't say that she employed me, such as Mr. Milburn had employed me.

Q Were you representing Mrs. Milburn at...