Cinco Enterprises, Inc. v. Benso

• Decision Date: 06 December 1994
• Docket Number: No. 80205,80205
• Parties: CINCO ENTERPRISES, INC., Appellee, v. Steve J. BENSO and Pasquale Benso, Appellant.
• Court: Oklahoma Supreme Court

Page 866

890 P.2d 866

1994 OK 135

CINCO ENTERPRISES, INC., Appellee, v. Steve J. BENSO and Pasquale Benso, Appellant.

No. 80205.

Supreme Court of Oklahoma.

Dec. 6, 1994.

Certiorari to the Court of Appeals, Division III.

Cinco Enterprises, Inc., filed this action against Steve J. Benso and Pasquale Benso on five promissory notes, alleging that Steve J. Benso is liable as the principal debtor and Pasquale Benso is liable as the guarantor. Pasquale Benso denied that he guaranteed the notes and asserted an accord and satisfaction as to liability under the guaranty agreement. Cinco Enterprises, Inc. moved for summary judgment. The Honorable Donald E. Powers, Judge of the District Court in Cleveland County, granted summary judgment in favor of Cinco Enterprises, Inc. and against Pasquale Benso as guarantor of the notes. The Court of Appeals affirmed.

Certiorari Previously Granted; Opinion of the Court of Appeals Vacated; Summary Judgment of the District Court Reversed and Cause Remanded for Further Proceedings.

D. Benham Kirk, Jr., Harvey D. Ellis, Jr., Oklahoma City, for appellant.

Timothy E. Rhodes, Michael R. Hoover, Oklahoma City, for appellee.

ALMA WILSON, Justice.

The dispositive question is whether Cinco Enterprises, Inc., appellee, is entitled to a money judgment as a matter of law on its claim that Pasquale Benso, appellant, promised to answer for five promissory notes signed by Steve J. Benso and sued on herein. We answer in the negative and hold that the district court erred in granting summary judgment in favor of Cinco Enterprises, Inc.

THE FACTS.

The parties do not dispute the basic facts. Steve J. Benso, the son of Pasquale Benso, appellant, was indebted to the Norman Bank of Commerce on the five promissory notes. The earliest note was executed in June, 1984, in the amount of $18,301.57, plus the finance charges and interest, and it provides that the purpose of the loan was to finance the renewal of four earlier loans and that it is secured by a financial statement. The second note was executed in December, 1984, in the amount of $27,500.00, plus finance charges and interest, and it provides that it is secured by real estate. The remaining three notes were executed in January, February and April, 1985, in the amounts of $2,500.00, $3,000.00 and $2,000.00 respectively, and each provides that the security is open.¹

On August 9, 1985, James K. West, Executive Vice President, Norman Bank of Commerce, made another loan to Steve Benso and Steve executed a sixth promissory note in the amount of $11,100.00 and his father, Pasquale Benso, executed a separate guaranty agreement.² The guaranty agreement, dated August 9, 1985, identifies the Norman Bank of Commerce as the lender and Steve Benso as the customer. The guaranty agreement does not identify the note or notes guaranteed, nor otherwise specify the credit to the customer and/or other consideration given for the guaranty, except in general terms, the printed language provides:

The undersigned Guarantor(s) hereby requests the Lender to give and continue to give the above name Customer(s) credit Steve J. Benso defaulted in the payment of some or all of the promissory notes and the Norman Bank of Commerce filed suit. The Norman Bank of Commerce was declared insolvent and Cinco purchased the six promissory notes from the FDIC, as receiver of the insolvent Commerce Bank of Norman, apparently in a liquidation sale.³ Cinco made separate settlement offers on each of the six notes to Steve Benso, but it did not pursue the suit against Steve Benso.⁴ Cinco also made a single settlement offer to Pasquale Benso.⁵ Pursuant to the settlement offer, Pasquale Benso paid Cinco $5,550.00. Cinco then sued Steve Benso and Pasquale Benso on the five promissory notes which had been executed prior to the sixth note and the guaranty, but Cinco voluntarily dismissed Pasquale Benso as a party to that suit.⁶

and in consideration for any credit given, the undersigned Guarantor hereby absolutely and unconditionally guarantees payment, on demand.... Guarantor agrees to pay ... any and all existing and future indebtedness and liabilities of every kind....

THE PROCEEDINGS.

A year later, in November, 1988, Cinco filed this cause against Steve J. Benso and Pasquale Benso. Cinco alleged that Pasquale Benso is liable for the payment of the five promissory notes pursuant to the guaranty agreement. Thereafter, Steve J. Benso filed a bankruptcy proceeding so that his liability is no longer at issue. In August, 1989, Cinco was granted a default judgment against Pasquale Benso. The default judgment was vacated in October of 1989.⁷

In May, 1992, Cinco moved for summary judgment asserting that Pasquale Benso's guaranty agreement is a continuing and unconditional guaranty which obligates him to answer for all the debts of Steve J. Benso. In response to summary judgment, Pasquale Benso asserted that the $5,550.00 payment was made in settlement of all claims by Cinco against Pasquale Benso and that, at the time the guaranty agreement was signed, he and the Norman Bank of Commerce agreed that the guaranty would not cover the previous loans, the five promissory notes herein. Cinco argued that evidence of any oral agreement limiting the terms of the written guaranty The district court granted summary judgment in favor of Cinco and against Pasquale Benso for the sum of $106,096.75, with interest thereon at the rate of 14% per annum until paid, together with costs and reasonable attorney fees. The Court of Appeals affirmed, concluding that the D'Oench, Duhme doctrine is inapplicable and that Pasquale Benso is not entitled to present parol evidence to alter the terms of the guaranty agreement. We previously granted certiorari.

is not admissible under the parol evidence rule and the D'Oench, Duhme doctrine. Pasquale Benso responded, arguing that the parol evidence rule does not bar evidence of mutual mistake and intent of the contracting parties so as to reform the guaranty agreement and that Cinco is not protected by the D'Oench, Duhme doctrine.

THE D'OENCH, DUHME DOCTRINE DOES NOT PRE-EMPT STATE LAW, IN

THE ABSENCE OF PROOF OF A SECRET AGREEMENT.

The district court judgment does not recite the legal authority that entitles Cinco to judgment as a matter of law. However, both parties urge that the judgment is based upon the D'Oench, Duhme doctrine. The federal common law D'Oench, Duhme doctrine protects the FDIC, or similar federal entities in preserving the going concern of a failed financial institution and the applicable federal deposit insurance fund.⁸ Under the D'Oench, Duhme doctrine, a debtor is estopped from asserting state law defenses based on a secret agreement between a financial institution and the debtor that would diminish an asset of a failed financial institution.

Cinco contends that the D'Oench, Duhme doctrine is triggered by the secret agreement between James K. West, Executive Vice President, Norman Bank of Commerce, and Pasquale Benso that the prior loans made to Steve J. Benso are not covered by the guaranty agreement. Pasquale Benso submitted a memorandum and an affidavit of James K. West. The memorandum, briefly explains the status of the loans made to Steve J. Benso and recognizes that Pasquale Benso has guaranteed "the note." The memorandum was prepared and placed in the bank file with the sixth note and the guaranty a few days after those documents had been completed. The affidavit explains the bank's unvarying policy to obtain a separate agreement for each loan guaranteed and to file the loan papers and the guaranty together. The affidavit also provides that West did not intend that the guaranty would cover all the loans made by the Norman Bank of Commerce to Steve J. Benso. Cinco objected to the memorandum and affidavit as inadmissible under the Statute of Frauds and the parol evidence rule, discussed infra.

Upon thorough review of the summary judgment evidence, we do not find any evidence of a secret agreement that might diminish an asset of the bank. There is no evidence showing that banking authorities did treat the subject guaranty agreement as covering the promissory notes sued on herein. Pasquale Benso's signature as guarantor is not found on any of the promissory notes or the extension agreements thereon. The guaranty agreement, signed contemporaneously with the sixth promissory note, does not expressly extend the guaranty to the subject notes. And, the guaranty agreement was not filed in the credit files for the subject notes, nor otherwise attached thereto. Cinco has failed to present any evidence to support the existence of a secret agreement under D'Oench, Duhme.⁹

THE STATE LAW ISSUES AND ARGUMENTS ARE REVIEWABLE.

Ordinarily, issues and arguments which are not presented to and passed upon by the trial court will not be reviewed on appeal.¹⁰ The parties represent that the district court passed upon the D'Oench, Duhme issues and argument, but there is no representation that the district court did not pass upon the state law issues and arguments. The summary judgment states that it is "based upon the authority and statements filed in support of and in opposition" to the motion for summary judgment and "upon the arguments of counsel" and finds "that there is no substantial controversy as to any material facts or issues and that plaintiff, CINCO, is entitled to judgment as a matter of law on plaintiff's claim." The issues relating to the intent of the guaranty agreement and the accord and satisfaction were argued on summary judgment and throughout this appeal and stand presented for our review.

THE CONSIDERATION FOR A PROMISE TO ANSWER FOR THE FIVE

PROMISSORY NOTES EXECUTED PRIOR TO THE GUARANTY

AGREEMENT IS A MATERIAL FACT WHICH MUST

BE PROVEN BY THE EVIDENCE.

We review the summary judgment granted to Cinco, first, to determine whether Cinco, as movant, carried its burden. The party moving for summary judgment has the burden to prove the facts...