Farmers Exchange v. Metro Contract. Serv.

• Court: Missouri Court of Appeals
• Writing for the Court: Edwin H. Smith
• Citation: Farmers Exchange v. Metro Contract. Serv., 107 S.W.3d 381 (Mo. App. 2003)
• Decision Date: 28 March 2003
• Docket Number: No. WD 60759.,WD 60759.
• Parties: FARMERS EXCHANGE BANK, a Missouri Banking Corporation, Respondent, v. METRO CONTRACTING SERVICES, INC., a Missouri Corporation, Defendant, Harlan R. Russell, Appellant, and Rose Mary Russell, Defendant.

Page 381

107 S.W.3d 381

FARMERS EXCHANGE BANK, a Missouri Banking Corporation, Respondent, v. METRO CONTRACTING SERVICES, INC., a Missouri Corporation, Defendant Harlan R. Russell, Appellant, and Rose Mary Russell, Defendant.

No. WD 60759.

Missouri Court of Appeals, Western District.

March 28, 2003.

Motion for Rehearing and/or Transfer to Supreme Court Denied May 27, 2003.

Application for Transfer Denied July 1, 2003.

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Jeffrey A. Befort and Greta A. McMorris, Kansas City, MO, for respondent.

Lyle L. Odo, Platte City, MO, for appellant.

Before SMITH, P.J., and LOWENSTEIN and HARDWICK, JJ.

EDWIN H. SMITH, Presiding Judge.

Harlan R. Russell, the appellant, in his capacity as the president of Metro Contracting Services, Inc. (Metro), a Missouri corporation, whose sole shareholders were the appellant and his then and now former wife, Rose Mary Russell (Ms. Russell),¹ executed two promissory notes in favor of Farmers Exchange Bank (Farmers notes), the respondent. As security for the notes, the appellant executed a personal guaranty in not only his name, but in the name of Ms. Russell, by forging her signature. Metro subsequently defaulted on the notes, prompting suit by the respondent against not only Metro, but against the Russells, under the personal guaranties, to collect the total balances then due on the notes. The suit against Ms. Russell was later dismissed due to her signature being forged. The case against the appellant proceeded to a summary judgment for the respondent in the amount of $372,791.47, plus interest and attorney's fees. The instant case arises out of the appellant's attempts to prevent the respondent from partially satisfying that judgment by attaching and executing upon the note proceeds owed to the Russells as payees of a promissory note executed by Eaton Investments, L.L.C. (Eaton note), in the principal amount of $293,000.²

The appellant raises seven points on appeal, raising the question of whether the trial court erred in failing to quash the prejudgment attachment of the appellant's interest in the Eaton note³ and the subsequent execution thereon in satisfaction of the respondent's judgment against the appellant. The implicated and overarching issue raised with respect to these claims is whether, under the applicable and controlling law, the appellant's interest in the Eaton note was subject to attachment and execution to satisfy the judgment against him. The resolution of that issue depends on whether the Russells held the note as tenants by the entirety or as tenants in common. The parties agree that if we determine that the trial court correctly found that they held the Eaton note as tenants in common, then the court did not err in finding that the Eaton note proceeds were subject to attachment and execution and in not quashing the prejudgment attachment. The parties, however, not only disagree on the proper classification of the appellant's interest in the Eaton note, but whether Missouri or Kansas law applies in deciding that issue. The appellant also claims that even if the appellant's interest in the Eaton note was subject to attachment and execution, the trial court still erred in failing to quash the prejudgment attachment and allowing execution pursuant thereto in that the prejudgment attachment was deficient on its face such that it was null and void, ab initio, rendering void the subsequent execution predicated thereon.

Because we find that the issue of the proper classification of the appellant's interest in the Eaton note is governed by Kansas law; that pursuant thereto his interest was as a tenant in common and, therefore, was subject, under Missouri law, to attachment and execution to satisfy the respondent's judgment against the appellant; and that the prejudgment attachment was not facially deficient, we affirm.

Facts

On April 14, 2000, the appellant, as the president of Metro, a Missouri corporation, with its principal place of business in Riverside, Missouri, in consideration of two loans from the respondent to Metro, executed two promissory notes in the principal amounts of $250,000 and $200,000. As further consideration for the loans to Metro, a personal guaranty was executed in the name of the appellant and Ms. Russell, guaranteeing full payment of all debts, liabilities and obligations of Metro to the respondent under the notes. However, the guaranty in Ms. Russell's name was forged by the appellant.

Sometime prior to August 9, 2000, the appellant sold the stock of Metro to Albert G. Rampone II without the written consent of the respondent, as required by the terms of the notes. Metro failed to make the required principal and interest payments of September 14, 2000. Consequently, on September 21, 2000, the respondent made written demand on Metro, the Russells and Rampone for the September note payments, but no payments were forthcoming. On October 4, 2000, Eaton Investments, L.L.C., executed a promissory note in favor of the Russells in the principal amount of $293,000. The note reflected that payments to be made thereunder were to be made to the Russells at 8909 Mohawk Road, Leawood, Kansas. According to the records of the Recorder of Deeds of Johnson County, Kansas, the Russells were the owners of record of the residential property located at that address. Metro also failed to make the required October 14, 2000, payments. Thereafter, by letter dated October 27, 2000, the Russells, as guarantors, were notified by the respondent that the notes were in default and that, pursuant to the terms of the notes, it was accelerating the payment of the notes.

On November 7, 2000, the respondent filed a two-count petition in the Circuit Court of Platte County against Metro and the Russells for "breach of promissory notes" as to Metro under Count I and "breach of guaranty" as to the Russells under Count II, seeking judgment for the amount of the balances then due under the notes as accelerated, plus costs and expenses of the action, including reasonable attorney's fees, and prejudgment and postjudgment interest. On December 15, 2000, all three defendants filed their answers to the respondent's petition. On January 2, 2001, Ms. Russell filed an amended answer. In their answers, the Russells admitted that they resided at 8909 Mohawk Road, Leawood, Kansas.

On February 23, 2001, the respondent filed a motion for leave of court to file its "Verified First Amended Petition and Application for Writ of Attachment." In its proposed first amended petition, the respondent added Counts III, IV and V: (1) Count III, against Metro and the appellant seeking actual damages "in excess of $25,000" and an award of punitive damages for "fraud on the note," alleging the falsification of financial statements submitted by Metro to the respondent to obtain the loans; (2) Count IV, against the appellant seeking the amounts due under the notes and an award of punitive damages for "fraud on the guaranty," alleging that the appellant forged the personal guaranty of Ms. Russell; and (3) Count V, an "application for writ of attachment," seeking prejudgment attachment, pursuant to "Rule 85.22 and Mo.Rev.Stat. § 521 et seq.," of the appellant's interest in the Eaton note, alleging that the appellant owned "at least a one-half interest in the Eaton note" as a tenant in common. In support of its application for the writ, the respondent attached the affidavit of Bradley D. Richerson, the executive vice president of the respondent.

On March 1, 2002, the trial court took up and sustained the respondent's motion for leave to file its amended petition. The court then proceeded to hear the respondent's application for a prejudgment writ of attachment of the appellant's interest in the Eaton note. At the hearing, the respondent argued that the appellant was a Kansas resident such that Kansas law applied in determining his interest in the Eaton note and that under Kansas law his interest in the Eaton note was as a tenant in common with Ms. Russell and, therefore, under Missouri law, it was subject to attachment to satisfy any judgment it might obtain against him in the underlying suit. In opposition to the issuance of the writ, the appellant argued that the appellant was a Missouri resident such that Missouri law applied, under which his interest in the Eaton note was held with Ms. Russell as tenants by the entirety and was therefore not subject to attachment. After hearing the evidence, the trial court, finding that the appellant, as a tenant in common, "own[ed] at least one-half interest in the Eaton Note, his interest being valued at $146,500," ordered the issuance of the prejudgment writ of attachment requested by the respondent, attaching the appellant's interest in the Eaton note. The writ issued the same day, attaching one-half of the $3,632.78 ($1,816.39) monthly payments on the Eaton note. At the same time of the issuance of the writ, the respondent dismissed, without prejudice, all the claims it had filed against Ms. Russell. On April 2, 2001, the appellant filed his notice of appeal with this court, appealing the issuance of the prejudgment attachment. On the motion of the respondent, that appeal was dismissed by this court on April 27, 2001.

On March 14, 2001, the appellant filed a third-party petition against Albert G. Rampone, Barbara Rampone, Aero Star Concrete, Inc., and Metro, alleging six counts: in Count I, seeking a judgment declaring the rights and obligations of the parties to the agreement selling the Metro stock to the third-party defendants, in Counts II, III, and IV, seeking damages for fraud, breach of contract, and negligence with respect to the sale of the Metro stock to the Rampones, and in Count V, seeking an accounting and the appointment of a receiver to manage and protect the assets of Metro and Aero Star.

On May 25, 2001, the respondent filed a motion for summary judgment on its...