Federal Deposit Ins. Corp. v. Galloway

• Decision Date: 12 July 1985
• Docket Number: Civ. A. No. 84-2106.
• Citation: 613 F. Supp. 1392
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Jack GALLOWAY; Jack Galloway, d/b/a Jack's Excavating, a/k/a Jack's Excavating Co.; John W. Meyers, Jr.; Lorna M. Meyers; Harry D. Sharp; and Brenda C.M. Sharp, Defendants.
• Court: U.S. District Court — District of Kansas

613 F. Supp. 1392

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Jack GALLOWAY; Jack Galloway, d/b/a Jack's Excavating, a/k/a Jack's Excavating Co.; John W. Meyers, Jr.; Lorna M. Meyers; Harry D. Sharp; and Brenda C.M. Sharp, Defendants.

Civ. A. No. 84-2106.

United States District Court, D. Kansas.

July 12, 1985.

COPYRIGHT MATERIAL OMITTED

Daniel B. Denk, McAnany, Van Cleave and Phillips, Kansas City, Kan., for plaintiff.

Ernest C. Ballweg, Cooke, Ballweg & Tuley, Leawood, Kan., for defendants Meyers & Sharp.

Joseph A. Bukaty, Kansas City, Kan., for defendants Galloway.

MEMORANDUM AND ORDER

EARL E. O'CONNOR, Chief Judge.

Through this action, plaintiff seeks to recover from defendant Jack's Excavating Co. ("Company") and its president, defendant Jack Galloway ("Galloway"), on some seven promissory notes. As against defendants John W. and Lorna M. Meyers and Harry D. and Brenda C.M. Sharp ("the guarantor defendants"), the action is based on certain guaranty agreements related to those seven notes. Defendant Company essentially admits its liability, while defendant Galloway seeks to avoid liability on the ground that he signed the notes only in his representative capacity. Among the defenses raised by the guarantor defendants are the statute of limitations and fraud in the inducement.

The case was tried to the court on May 22 and 23, 1985. Upon reviewing the pleadings, the evidence received at trial, and the arguments and statements of counsel, the court makes the following:

Findings of Fact

1. Plaintiff Federal Deposit Insurance Corporation ("FDIC") has been appointed by the Banking Commissioner of the State of Kansas as receiver of the former Mission State Bank & Trust Company ("the Bank").

2. On August 8, 1980, the District Court of Johnson County, Kansas, authorized FDIC (as receiver of the Bank) to sell to FDIC (in its corporate capacity) all assets of the Bank remaining after the sale or transfer of certain assets and liabilities to The Mission Bank, the Bank's successor.

3. Pursuant to that court order, certain assets, including the seven promissory notes and three guaranties at issue in this case, were sold or assigned to FDIC in its corporate capacity. Thus, any interest in those instruments once held by the Bank is now held by FDIC.

4. Defendant Jack Galloway is the president of defendant Jack's Excavating, a/k/a Jack's Excavating Co.

5. Defendants John W. Meyers, Jr., and Lorna M. Meyers are husband and wife. John W. Meyers was a stockholder and officer of Johnson County Equipment, Inc., which engaged in the purchase and resale of heavy equipment.

6. Defendants Harry D. Sharp and Brenda C.M. Sharp are husband and wife.

7. Defendants John W. Meyers and Harry D. Sharp each owned 25% of the stock in Kan-Tuck Coal Company, a Kentucky corporation.

8. Plaintiff's Exhibit 10 is a promissory note executed on November 30, 1977, with an initial maturity date of February 28, 1978. The principal amount financed through this note was $10,006.00, at an interest rate of 10 percent. The note was signed by "Jack Galloway," whose signature appears below the typewritten name "Jacks Excavating." The note indicates, and the evidence received at trial confirms, that the note's payee ("The Mission State Bank & Trust Company") granted various extensions of the maturity date in return for partial payments by the maker(s). The last such extension expired on June 5, 1979.

9. Plaintiff's Exhibit 13 is a promissory note executed on October 25, 1977, with an initial maturity date of January 23, 1978. The principal amount financed through this note was $103,350.00, at an interest rate of 10 percent. The note was signed by "Jack Galloway," whose signature appears below the typewritten name "Jack's Excavating Co." The note indicates, and the evidence received at trial confirms, that the note's payee ("The Mission State Bank & Trust Company") granted various extension of the maturity date in return for partial payments by the maker(s). The last such extension expired on June 23, 1979.

10. Plaintiff's Exhibit 16 is a promissory note executed on March 21, 1979, with a maturity date of April 1, 1982. The principal amount financed through this note was $531,000.00, at an interest rate of 11.08 percent. Repayment was to be made in 36 monthly installments of $17,468.66, beginning on May 1, 1979, and continuing on the first day of each succeeding month until paid in full. The note was signed by "Jack Galloway." The name of no other maker appears on the face of the note. The note's payee ("The Mission State Bank & Trust Company") granted no extension of the note's maturity date.

11. Plaintiff's Exhibit 20 is a promissory note executed on March 14, 1979, with a maturity date of May 13, 1979. The principal amount financed through this note was $28,240.51, at an interest rate of 11 percent. The note was signed by "Jack Galloway." The name of no other maker appears on the face of the note. The note's payee ("The Mission State Bank & Trust Company") granted no extension of the note's maturity date.

12. Plaintiff's Exhibit 23 is a promissory note executed on February 10, 1979, with a maturity date of May 11, 1979. The principal amount financed through this note was $54,000.00, at an interest rate of 10 percent. The note was signed by "Jack Galloway." The name of no other maker appears on the face of the note. The note's payee ("The Mission State Bank & Trust Company") granted no extension of the note's maturity date.

13. Plaintiff's Exhibit 26 is a promissory note executed on August 5, 1978, with an initial maturity date of October 4, 1978. The principal amount financed through this note was $112,000.00, at an interest rate of 10 percent. The note was signed by "Jack Galloway." The name of no other maker appears on the face of the note. The note indicates, and the evidence received at trial confirms, that the note's payee ("The Mission State Bank & Trust Company") granted various extensions of the maturity date in return for partial payments by the maker(s). The last such extension expired on June 5, 1979.

14. Plaintiff's Exhibit 29 is a promissory note executed on February 15, 1978, with an initial maturity date of April 16, 1978. The principal amount financed through this note was $52,003.00, at an interest rate of 10 percent. The note was signed by "Jack Galloway." The name of no other maker appears on the face of the note. The note indicates, and the evidence at trial confirms, that the note's payee ("The Mission State Bank & Trust Company") granted various extensions of the maturity date in return for partial payments by the maker(s). The last such extension expired on June 5, 1979.

15. In signing each of these seven notes, Galloway intended to act only as the representative of the Company. Neither he nor the Bank intended that he be personally liable on the notes.

16. Galloway had authority to sign these notes on behalf of the Company.

17. On May 14, 1981, FDIC realized proceeds of $170,755.25 from the sale of collateral that had secured these notes.

18. Demand has been made for the payment of the notes' remaining principal and accrued interest.

19. As of April 15, 1985, the remaining principal and interest due on these seven notes totalled $1,068,578.25. Since that date, interest has been accruing on the notes at the contractual rate of $209.79 per day.

20. Aside from its notarization, Plaintiff's Exhibit 32 reads, in full:

LOAN GUARANTY AGREEMENT

10-20 , 1977

The undersigned for and in consideration of the sum of One Dollar and other good and valuable considerations, to me in hand paid by THE MISSION STATE BANK & TRUST CO., Mission, Kansas (hereinafter called the "Bank") the receipt whereof is hereby acknowledged, does hereby absolutely and unconditionally guarantee to said Bank, its successor, successors or assigns, payment at maturity of any and all existing and future indebtedness and liability of every kind, nature and character of $ 63000.00 (Plus all legal interest charges made by said Bank) either made or endorsed by Jack Galloway (Hereinafter called the "Borrower") to the Bank, howsoever and whensoever created, or arising, or evidenced, or acquired; and the undersigned waives notice of the acceptance of this guaranty and any and all such indebtedness and liability. The undersigned hereby waives presentment, protest, notice, demand or action on delinquency in respect of any such indebtedness or liability, including any right to require the Bank to sue or otherwise enforce payment thereof.

This guaranty is made and shall continue as to any and all such indebtedness and liability of the borrower to the bank incurred or arising prior to receipt by the bank of written notice of the termination hereof from the undersigned.

This guaranty shall bind the heirs, personal representatives, succesors assigns of the undersigned and shall inure to the Bank, its successors and assigns.

/s/ Jack W. Meyers Guarantor

21. With the following exceptions, plaintiff's Exhibit 33 is identical to Plaintiff's Exhibit 32:

(1) The date is "3-20-1979," rather than "10-20-1977";

(2) The amount is "$531,000.00," rather than "$63,000.00"; and

(3) The signatures are those of "Jack W. Meyers" and "Lorna M. Meyers," rather than merely "Jack W. Meyers."

22. Plaintiff's Exhibit 34 is identical to Plaintiff's Exhibit 33, except that the signatures appearing thereon are those of "Harry D. Sharp" and "Brenda C.M. Sharp," rather than "Jack W. Meyers" and "Lorna M. Meyers."

23. Defendant John W. Meyers signed Plaintiff's Exhibit 32 because Galloway had borrowed money from the Bank for the purpose of purchasing $63,000.00 worth of machinery from Johnson County Equipment, Inc. The guaranty was thus beneficial to defendant Meyers.

24. The guarantor defendants signed Plaintiff's Exhibits 33 and 34 because Galloway had borrowed $531,000.00 from the Bank so he could purchase equipment of that value from Kan-Tuck Coal Company. The sale...