Federal Deposit Ins. Corp. v. Morrison, s. 85-5272

• Court: U.S. Court of Appeals — Sixth Circuit
• Writing for the Court: Before ENGEL and GUY, Circuit Judges, and PECK; PER CURIAM
• Citation: Federal Deposit Ins. Corp. v. Morrison, 816 F.2d 679 (6th Cir. 1987)
• Decision Date: 14 April 1987
• Docket Number: Nos. 85-5272,85-5273,s. 85-5272
• Parties: Unpublished Disposition NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. P. Douglas MORRISON; Randy Tyree; Tennesseans for Tyree; George Dukas and Justine Dukas, Defendants-Appellees, Cross-Appellants.

Page 679

816 F.2d 679

Unpublished Disposition

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellant Cross-Appellee, v. P. Douglas MORRISON; Randy Tyree; Tennesseans for Tyree George Dukas and Justine Dukas Defendants-Appellees, Cross-Appellants.

Nos. 85-5272, 85-5273.

United States Court of Appeals, Sixth Circuit.

April 14, 1987.

Before ENGEL and GUY, Circuit Judges, and PECK, Senior Circuit Judge.

PER CURIAM.

This case involves two separate appeals arising from the same core of operative facts, i.e., the execution of a promissory note for the purpose of raising funds for the campaign of then-gubernatorial candidate Randy Tyree, and a subsequent execution of a guaranty for such loans. For the following reasons, the trial court's grant of summary judgment in favor of Randy Tyree and P. Douglas Morrison is reversed, while its grant of summary judgment against the Dukases is affirmed.

I. Factual and Procedural History

The Federal Deposit Insurance Corporation (FDIC) purchased certain assets in its corporate capacity, pursuant to 12 U.S.C. Sec. 1823(c)(2)(A), from the receiver of the failed United American Bank in Hamilton County, Tennessee (Bank). Among those assets was an interest-bearing promissory note dated September 20, 1982, in the amount of $378,750.00, specifying repayment on demand and, if no demand was made, within ninety days after execution of the note. The note was executed "Tennesseans for Tyree by P. Douglas Morrison, Chairman," Tennesseans for Tyree being an unincorporated association. The note was executed during Randy Tyree's gubernatorial campaign in 1982 and was for the purpose of obtaining financing for that campaign.

Apparently also within the Bank's files was a document entitled "Continuing Guaranty" on a form printed for the United American Bank in Knoxville, Knoxville, Tennessee. The words "Knoxville, Knoxville" in the lender's name have been lined out and "Hamilton County" has been substituted. The Guaranty is dated November 15, 1982, and is signed by defendants George E. Dukas and Justine M. Dukas. It guarantees all debts of the Tennesseans for Tyree "now existing or hereafter arising" up to a total of "unlimited" dollars.

Since the note was in default, the FDIC brought suit against the Tennesseans for Tyree, Randy Tyree, and P. Douglas Morrison on the note, as well as George and Justine Dukas on their guaranty. The trial court granted summary judgment on the note in favor of Tennesseans for Tyree, Randy Tyree and P. Douglas Morrison upon the following findings:

a) although probably no longer in existence, Tennesseans for Tyree was a "political campaign committee" within the meaning of Tenn.Code Ann. Sec. 2-10-102(10)(C); ¹

b) defendant Morrison signed the note on behalf of the committee as an agent for a disclosed, then-existing principal;

c) as a general rule, members of an unincorporated association are not personally responsible for the association's contracts made without authority and in the absence of ratification or other evidence of assent; and

d) there was no evidence in the record to indicate any intent to be personally bound or that the bank intended committee members to be personally liable.

Although the district judge also held that the Dukases were not liable on the note as members of the political campaign committee, he subsequently entered summary judgment against them on the question of their liability on their guaranty. In so ruling, the court noted that their testimony to the effect that they signed the form knowing only that it was a "fund-raising thing for Randy," that they never read the form or questioned its import or possible use, that they were not concerned that the form contained blank spaces and never questioned how they would be filled in nor gave any instructions about their content. This led the court to conclude that "in recklessly signing a continuing guaranty to assist in raising funds for their son-in-law, Randy Tyree, Mr. and Mrs. Dukas 'lent themselves to a scheme likely to deceive banking authorities,' see D'Oench, Duhme and Co. v. Federal Deposit Insurance Corp., 315 U.S. 447 (1942)." He further found that their defenses of fraud in the inducement and failure of consideration were barred under federal case law.

The FDIC here appeals the ruling in favor of Randy Tyree and P. Douglas Morrison, while the Dukases appeal the ruling in favor of the FDIC on the guaranty. We address these appeals seriatim.

II. The FDIC's Appeal Against Tyree and Morrison

We reverse the grant of summary judgment in favor of Tyree and Morrison because we find there were disputed questions of fact which cannot be resolved without trial. Tennessee law provides that the liability of members of an unincorporated association of a social or political nature shall be determined on the principles of agency. Blair v. Southern Clay Mfg. Co., 173 Tenn. 571, 121 S.W.2d 570 (1938). At the outset, it is questionable whether "Tennesseans for Tyree" even qualifies as a bona fide political association. Deposition testimony of both Tyree and Morrison raise substantial questions as to the lack of any organizational structure, the true membership of the group, the regularity of its meetings, or the existence of any charter or by-laws. Tyree stated at various points that the group was composed of only three individuals, C.H. and Jake Butcher, and Jesse Barr, ² and, conversely, that the group could conceivably be deemed, in a larger sense, to include everyone who had voted for him in the election. Tyree further testified that the sole purpose of the group was to obtain loans to finance his campaign and that, although he was not a "member" of the group, he was involved in several meetings with Barr and the Butchers concerning the means of financing his campaign expenditures. Morrison also testified that he had never been a member of the organization, despite the fact that he signed several promissory notes in the capacity of "Chairman" of the association. Tyree further testified that the name Tennesseans for Tyree was initially selected simply for the purpose of disclosure under the state's campaign disclosure laws and that neither the Butchers nor Barr ever expressly stated that they considered themselves members of such an organization.

On the basis of such nebulous contradictory testimony, a fact question arises as to whether this organization was ever sufficiently organized to qualify for treatment under the agency principles applicable to unincorporated political associations. ³ Even if the organization qualifies as a political association, such a determination does not shield from liability members who contract on behalf of the association with authority or who knowingly accept the benefits of the contract. See Rich Printing Co. v. Estate of Kenneth Douglas McKellar, 46 Tenn.App. 444, 330 S.W.2d 361 (1959) (estate of deceased senator liable on contract for printing services on grounds of ratification, i.e., knowledge that services were being rendered for benefit of his campaign). Although Morrison testified that he was not a member of the association, he referred to himself at various times as Tyree's fund raising chairman and, in one transaction where he questioned the necessity for his signature, he stated that Tyree instructed him to sign the note as Jesse Barr directed, and assured him that he would incur no personal liability by doing so. ⁴ Also, when Tyree was asked whether Morrison was a member of Tennesseans for Tyree, he stated, "I don't know. It depends on how you define Tennesseans for Tyree." The evidence of record is sufficient to raise factual questions as to the existence of the association and its membership, as well as potential ratification of the contract by Tyree in his undisputed acceptance of the funds and expenditure of them in satisfaction of campaign debts.

III. The Dukases' Appeal Against the FDIC

The Dukases argue that the court erred in applying the rationale of D'Oench to bar certain of their defenses on the grounds that they never dealt directly with the Bank and that the guaranty they executed was facially invalid due to the interlineation and substitution of "Hamilton County" as the named bank. They further contend that, since the trial judge did not specifically address each one of their asserted defenses, that some of those defenses were viable and raised questions of fact. The Dukases raised the following defenses before the trial court and on appeal: discharge by material alteration, failure of consideration, lack of mutual assent, fraud in the inducement, lack of effective delivery, and estoppel. Based on the circumstances surrounding the execution of this guaranty, we find summary judgment for the FDIC appropriate.

In her deposition, Mrs. Dukas testified that someone from Randy Tyree's campaign headquarters telephoned her and requested that she sign something for a fundraiser for Tyree. She further testified that she and her husband had previously attended as many of Tyree's fund-raising events as possible and had donated money to his campaign on more than one occasion, although they had never before been asked to sign any document in connection with fund raising. She stated that, upon her receipt of the blank Continuing Guaranty form, she signed it without "really reading it" and then took it home for Mr. Dukas's signature. Mr. Dukas likewise testified that he did not read the document prior to signing it. The next day, someone from Tyree's campaign headquarters picked up the form from the Dukases, still containing the blank spaces. ⁵

The Dukases acknowledged that they signed the form in blank for the purpose of raising funds for Randy Tyree, that the signatures on...