Crowe v. Congress Financial Corp. (Southern)

• Decision Date: 07 June 1990
• Docket Number: No. A90A0072,A90A0072
• Parties: CROWE v. CONGRESS FINANCIAL CORPORATION (SOUTHERN).
• Court: Georgia Court of Appeals

Page 321

395 S.E.2d 321

196 Ga.App. 36

CROWE v. CONGRESS FINANCIAL CORPORATION (SOUTHERN).

No. A90A0072.

Court of Appeals of Georgia.

June 7, 1990.

Rehearing Denied June 20, 1990.

Certiorari Denied Sept. 4, 1990.

Robert S. Devins, Atlanta, for appellant.

Parker, Hudson, Rainer & Dobbs, C. Edward Dobbs, Jack C. Basham, Jr., and David N. Heaton, Atlanta, for appellee.

BEASLEY, Judge.

Defendant Crowe appeals the grant of partial summary judgment to plaintiff Congress Financial Corporation (Southern) and the denial of his cross-motion for partial summary judgment. The issue is the enforceability of a personal guaranty executed by Crowe in conjunction with certain financing agreements between Crowe Manufacturing Corporation of which Crowe was president and Congress' assignor, James Talcott, Inc.

What follows is undisputed. On August 1, 1984, Crowe Mfg. entered into certain financing agreements with Talcott whereby Talcott would periodically make loans to Crowe Mfg. To induce Talcott to enter into the financing arrangement, Crowe the same day executed a personal guaranty of payment of all of the liabilities and obligations at any time owing by Crowe Mfg. to Talcott under the financing agreements or otherwise.

By certified letters dated April 29, 1986, Congress notified Crowe Mfg. and Crowe individually that Congress had acquired Talcott's stock and that following the acquisition, Talcott arranged to transfer its financing business to Congress. Collectively, the letters further advised that Talcott had assigned to Congress all of its right, title and interest in the financing arrangements with Crowe Mfg., including the personal guaranty; that the assignment became effective on opening of business May 1 as to all outstanding loans, advances, and other financial accommodations under the financing agreements including the guaranty and with respect to all transactions under the financing agreements including the guaranty, arising on and after May 1; that as previously advised, Congress had been acting as agent for Talcott in connection with the financing agreements until the assignment could be effectuated; and that if there were any questions concerning the assignment not to hesitate to contact Congress.

By virtue of the substitution of Congress for Talcott, Congress became the lender for Crowe Mfg., and Congress continued to make advances to Crowe Mfg. pursuant to the financing agreements. Congress made a number of these advances at Crowe's request.

On March 9, 1987, Crowe Mfg. filed a petition for relief under Chapter 11 of the United States Bankruptcy Code. The filing of bankruptcy was an event of default under the financing agreements. At the time of the filing, Crowe Mfg. was indebted to Congress under the financing agreements in the amount of $3,351,577.88. After the filing, Congress continued to collect on the collateral securing Crowe Mfg.'s indebtedness.

On August 27, Crowe Mfg., Congress and Auto-Lok, Inc., which had purchased Crowe Mfg.'s assets, filed an adversary proceeding in the bankruptcy case against several defendants, including Crowe and Richmond Rack Industries, Inc. The principal purpose of the proceeding was to recover equipment removed from Crowe Mfg.'s premises allegedly without the consent of the bankruptcy court or Crowe Mfg. after the bankruptcy petition was filed. The equipment was believed to have been moved to Richmond Rack. Crowe Mfg. also sought to collect on pre-bankruptcy and post-bankruptcy accounts receivable owed by Richmond Rack. Congress joined in the proceeding because it had a security interest in Crowe Mfg.'s equipment and accounts receivable. Congress believed that all defendants, including Crowe, either were involved in removing or had possession of some of the equipment.

Crowe and another defendant in the bankruptcy adversary proceeding filed a confession of judgment in that action and on January 12, 1988, the bankruptcy court entered judgment in favor of plaintiffs directing that the equipment and documents sought be returned to Auto-Lok. Plaintiffs and the remaining defendants settled, and on August 29, the bankruptcy court approved it. On October 27, in accord with the settlement, the adversary proceeding was dismissed with prejudice against the remaining defendants.

Prior to Crowe's confession of judgment in the bankruptcy action, on November 23, 1987, Congress filed the present action against Crowe alleging, inter alia, that he was personally liable under the guaranty for Crowe Mfg.'s indebtedness to Congress then in the amount of $1,754,745.36. Congress also prayed for $1,000,000 exemplary damages, expenses of litigation including attorney fees, post-judgment interest, costs, and attorney fees of 15 percent of the indebtedness due and owing under the financing agreements and guaranty, in the amount of $263,211.

On July 11, 1989, the court entered a final judgment in favor of Congress and against Crowe in the principal amount under the guaranty of $1,776,370.80 plus post-judgment interest at the legal rate, and $266,455.62 in attorney fees pursuant to OCGA § 13-1-11.

1. Crowe contends the guaranty was satisfied or in essence discharged by way of termination of the financing agreements at their second anniversary, August 1, 1986, inasmuch as Talcott had ceased to exist on May 1, 1986.

Crowe relies on paragraph nine of the agreements which provided in part that the contract be for "an initial term of two years from its effective date" to be "automatically renewed for successive periods of one year unless terminated on sixty (60) days' prior written notice...." The provision...