Commerce Bank of St. Louis, N.A. v. Wright, 43576
| Citation | 645 S.W.2d 17 |
| Decision Date | 26 October 1982 |
| Docket Number | No. 43576,43576 |
| Parties | 37 UCC Rep.Serv. 502 COMMERCE BANK OF ST. LOUIS, N.A., Plaintiff-Respondent, v. W. Polk WRIGHT and Elinor Faust Wright, Defendants-Appellants. |
| Court | Missouri Court of Appeals |
Thomas J. Frawley, Kohn, Shands, Elbert, Gianoulakis & Giljum, St. Louis, for defendants-appellants.
Jerome L. Rubenstein, Kathleen R. Sherby, St. Louis, Lloyd A. Palans, Clayton, for plaintiff-respondent.
This is an action by a creditor bank of a bankrupt corporation against two persons who had guaranteed payment of the bankrupt's debt. Defendant guarantors appeal from summary judgment in favor of the bank. We affirm the judgment as modified.
Summary judgment is proper only if the pleadings, depositions, admissions on file, and affidavits demonstrate clearly that no genuine issue of material fact exists and that the moving party is entitled to summary judgment as a matter of law. Rule 74.04(c). In reviewing the entry of summary judgment, we examine the entire record in the light most favorable to appellants and resolve any doubts in their favor. Edwards v. Heidelbaugh, 574 S.W.2d 25, 27 (Mo.App.1978). The record on appeal shows the following uncontested facts.
In December of 1972, defendant W. Polk Wright offered to buy the outstanding shares of stock of the Buck X-Ograph Company from the current shareholders for a certain price. He negotiated with plaintiff bank for a loan to finance this stock acquisition. Plaintiff bank agreed to make a loan directly to the corporation, secured by the corporation's real estate, fixtures, inventory, equipment, machinery, accounts receivable, and certificates of deposit, with the personal guarantees of Mr. and Mrs. W. Polk Wright for additional security.
The purchase offers were accepted by owners of more than ninety percent of the corporation's stock by the end of February, 1973. Arrangements were made for certificates representing such shares to be placed by the sellers in an escrow account along with blank stock transfer endorsements. On March 5, 1973, the corporation's note, containing the promise to pay to the order of plaintiff bank the principal amount of $360,000 plus interest at the rate of 8 1/4% per year (10% after default) in installments according to a set schedule, was executed by the corporation's president. That same day, March 5, 1973, the defendants, W. Polk Wright and Elinor Faust Wright, signed a guaranty agreeing to pay all loans made by the plaintiff bank to the corporation. The president of the corporation, by letter dated March 5, 1973, directed the bank to pay the proceeds of the loan to the stock escrow account. In due course such funds were dispersed to the selling shareholders, the tendered stock certificates were surrendered to the corporation, and a new certificate for the shares was issued in the name of W. Polk Wright.
On September 25, 1975, the corporation filed a voluntary petition in bankruptcy in United States District Court for the Eastern District of Missouri. The bank filed a proof of claim against the bankrupt's estate, demanding amounts due and owing on the note.
As part of the bankruptcy proceedings, the court authorized the sale of the corporation's real estate for $300,000. Expenses were deducted, and the remaining proceeds of the sale, $255,044.83, were ordered to be held in an interest-bearing certificate of deposit in the plaintiff bank in accordance with a stipulation agreement between the bank and the trustee, which is not part of the record of this appeal. The bankruptcy court further ordered that the liens of the bank be transferred from the realty to the certificate of deposit, the funds represented thereby, and all earnings in respect thereof, pending a final determination of the validity of those liens.
The equipment of the corporation was sold for $46,406, and the court specifically ordered that the bank's lien in at least a portion of that property be transferred to the proceeds of the sale. The trustee collected $1,822.11 of the corporation's accounts receivable.
The trustee in bankruptcy, in November of 1976, filed a complaint in bankruptcy court against the bank alleging that the March 5, 1973 note of the corporation was for "fictitious consideration" and that the security interests or liens incident thereto were null and void, since none of the $360,000 loan proceeds were received by or for the corporation and thus the corporation had no value in return for encumbering all its assets. The trustee described the transaction as a personal loan to W. Polk Wright "camouflaged" as a loan to the corporation. The trustee also demanded actual and punitive damages from W. Polk Wright and other individuals, as officers and directors of the corporation, for their participation in the March 5, 1973 transaction. The bank crossclaimed against W. Polk Wright and brought third party complaints against a title insurance company which insured the mortgage on the corporation's property and Elinor Faust Wright.
Those parties, except for the Wrights, joined in a "Stipulation for Dismissal" on November 17, 1978, to settle the above claims. The title insurance company agreed to pay $15,000 to the bank to reimburse the bank for its losses incurred in connection with the note of March 5, 1973. Four officers and directors of the corporation, for their contribution to the settlement, undertook to pay $6,350 to the trustee and $1,150 to the bank. Again, the stated purpose of the $1,150 payment was to reimburse the bank for its losses in connection with the corporation's note. The trustee agreed that he would pay the principal balance owed to the bank on the note, $202,637.30, and assign to the bank its claim against W. Polk Wright. In return the bank stipulated that:
Upon receipt of the sum of Two Hundred Two Thousand Six Hundred Thirty-Seven and 30/100 ($202,637.30) Dollars, the law requiring that said sum be utilized to satisfy that portion of Commerce Bank of St. Louis, N.A.'s claim against Buck X-Ograph Company, Bankrupt, which is allowable in bankruptcy, Commerce Bank of St. Louis, N.A., for itself, its successors and assigns and anyone claiming through or under it, hereby acknowledges that Commerce Bank of St. Louis, N.A., has no further claims against Buck X-Ograph Company which are allowable in bankruptcy and, therefore, covenants and undertakes with Buck X-Ograph Company, Bankrupt, and Lawrence Sanders, Trustee in Bankruptcy of the Estate of Buck X-Ograph Company, Bankrupt, forever to refrain and desist from instituting or asserting against Buck X-Ograph Company, Bankrupt, or Trustee in Bankruptcy of the Estate of Buck X-Ograph Company, Bankrupt, and claims, causes of action, demands or suits of whatever nature or kind, either directly or indirectly, for the recovery of any amounts arising under and by virtue of the above-described Promissory Note dated March 5, 1973, and all first-lien deed of trust and security interest in and to the Bankrupt's property allegedly securing the repayment of the aforesaid Promissory Note;
The stipulation for dismissal was approved by the bankruptcy court on January 5, 1979, and on January 16, 1979, the trustee assigned its claim against W. Polk Wright to the bank. On March 5, 1979, the bank paid to the trustee the balance of the proceeds of the sale of the realty (reduced by $202,637.30 which the bank retained as its share of the settlement) and interest on the sale proceeds (which amounted to approximately $47,000). The bank had in addition to the principal balance of $202,637.30, the $15,000 from the title insurance company and $1,150 from the corporate directors and officers.
On October 11, 1979, the debts of the Buck X-Ograph Company, duly adjudged a bankrupt, were discharged.
In June of 1979 the bank brought the instant suit against defendants on their guaranty. Both sides moved for summary judgment, each side supporting its motion with affidavits and exhibits. The court denied defendants' motion, and granted plaintiff's motion for summary judgment in the amount of $114,864.40. 1 This sum represented interest on the outstanding daily balance of the loan from September 25, 1975 to January 16, 1979, in the amount of $68,318.40, and attorney's fees of $41,560.00 incurred in collecting the note and attorney's fees of $4,986.00 incurred enforcing defendants' guaranty. Defendants appealed.
Two arguments can be discerned from defendants' single point on appeal. First, that in the "Stipulation for Dismissal" of the trustee's complaint the bank released the debtor corporation without expressly reserving its right to pursue the guarantors, so that the guarantors were prejudiced by the loss of any right of subrogation against the debtor and thereby discharged. Second, that the bank had a security interest in the corporation's assets, the value of which exceeded the entire amount owed by the debtor to the bank, and the bank's failure to satisfy all debts from this collateral discharged the guarantors.
The bank specifically rebuts these contentions, but relies primarily on the strong...
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