Fleck v. Ragan, 46A03-8704-CV-98
| Decision Date | 18 November 1987 |
| Docket Number | No. 46A03-8704-CV-98,46A03-8704-CV-98 |
| Citation | 514 N.E.2d 1287 |
| Parties | 5 UCC Rep.Serv.2d 644 John C. FLECK, Virginia Fleck, Thomas Hickey and Jane Hickey, Appellants (Defendants Below), v. Jack J. RAGAN and Mary Kay Ragan, Appellees (Plaintiffs Below). |
| Court | Indiana Appellate Court |
Fred M. Cuppy, Kathryn D. Schmidt, Thomas, Burke, Dyerly & Cuppy, Merrillville, for appellants.
Dennis F. Smith, La Porte, for appellees.
John and Virginia Fleck (Flecks) and Thomas and Jane Hickey (Hickeys) appeal the general judgment of the trial court ordering each of them to pay Jack and Mary Ragan (Ragans) six thousand one hundred fifty-nine dollars and ninety-three cents ($6,159.93).
The Flecks and Hickeys raise three issues 1 on this appeal, which we consolidate and restate as:
1) Whether the trial court's judgment is contrary to law and contrary to the evidence because the Flecks and Hickeys were merely accommodation parties for the Ragans.
2) Whether the trial court's judgment against the Hickeys is contrary to law and contrary to the evidence because their guaranty was not supported by consideration.
Affirmed.
In January, 1978, Jack Ragan, David Kramer and John Fleck formed a corporation, Kramer/Ragan and Associates, Inc. The First National Bank & Trust Co. of LaPorte (Bank) agreed to extend to the new corporation a line of credit in the amount of $60,000 on the condition that the principals (Ragan, Kramer and Fleck) and their wives guarantee payment. The corporation subsequently drew down the entire $60,000.
In December, 1979 or January, 1980, Kramer left the corporation, paying Bank $20,000 in settlement of his portion of the outstanding debt. At this time, the corporation was reorganized and renamed H.F.R., Inc., with Thomas Hickey coming in as a shareholder.
On March 4, 1980, a new note was issued to H.F.R., Inc. to reflect the balance of $40,722.37 still owing after Kramer paid his share. Guaranties were signed by the principals (Ragan, Fleck and Hickey) and their wives. After several renewals of this note, a final note was issued on December 23, 1980, due March 23, 1981. The note was not paid when due and by September 28, 1981, the principal balance was $33,622.37.
At this time, Bank called the note and on October 1, 1981, sued the Ragans on their guaranty. Bank obtained an order of attachment, so when the Ragans sold their house, Bank received the proceeds to pay off the loan. The Ragans moved to add the Flecks and Hickeys as permissive parties based on the guaranties they had signed. The trial court granted the motion and subsequently entered judgment against the Flecks and the Hickeys.
Under our standard of review we presume the general judgment of the trial court is based on findings supported by the evidence. We will not weigh conflicting evidence but consider only evidence most favorable to the prevailing party. We will affirm the trial court's judgment if there is evidence of probative value that sustains the judgment. In addition, when we review a general finding of the trial court we must affirm if it is sustainable on any legal theory which is supported by the evidence. We will reverse a decision as contrary to the evidence only if the trial court's decision is not supported by any substantial and probative evidence. General Plating & Engineering v. Syn Indus. (1985), Ind.App., 472 N.E.2d 1290, 1292. (Citations omitted.)
Specifically, the Flecks and Hickeys argue that the evidence establishes that they were merely accommodation parties and as such cannot be liable to the Ragans, the party accommodated. The law on this point is quite clear. IC 26-1-3-415(5) provides:
(5) An accommodation party is not liable to the party accommodated, and if he pays the instrument has a right of recourse on the instrument against such party.
(Emphasis added).
The Fleck's and Hickeys' argument overlooks one important fact, though. The accommodated party in this case was not the Ragans. There is ample evidence to support a conclusion by the trial court that the accommodated party was H.F.R., Inc. The line of credit and the promissory notes evidencing the debt were for the corporation H.F.R., Inc., formerly Kramer/Ragan and Associates, Inc. The Kramers, Ragans, Flecks and Hickeys all signed guaranties at some point to guarantee payment of the corporation's debt. Thus, although the Flecks and Hickeys correctly contend they were accommodation parties, the evidence shows that the Ragans were also accommodation parties and not the accommodated party. See In re Alliance Beverage Co., Inc., 420 F.Supp. 437, 442 (N.D.Ind.1976); IC 26-1-3-415(1).
The issue becomes whether the trial court's judgment is contrary to law because the Flecks and Hickeys were ordered to contribute for their share of the debt paid by the Ragans. The Indiana Code is silent as to the liability between co-guarantors. Thus we must look to the common law. IC 26-1-1-103.
The theory of contribution between co-sureties is not a novel one. See eg. Nurre v. Chittenden (1877), 56 Ind. 462; Rankin v. Collins (1875), 50 Ind. 158; Comegys v. State Bank of Ind. (1855), 6 Ind. 357. Likewise, joint principals on a note are held liable for contribution. McLochlin v. Miller (1966), 139 Ind.App. 443, 217 N.E.2d 50. The right of contribution operates to make those who assume a common burden, bear it in equal proportions. Id., 217 N.E.2d at 52.
This theory has also been applied to co-guarantors. In Hartung v. Architects Hartung/Odle/Burke, Inc. (1973), 157 Ind.App. 546, 301 N.E.2d 240, reh. denied (1973), the court addressed the issue whether a co-guarantor could be forced to contribute when the principal obligor has sufficient funds to pay the note. Implicit in the court's affirmative holding is the rule of contribution between co-guarantors. We conclude that the trial court's judgment is not contrary to law because it is sustainable on the theory of contribution.
The Hickeys also raise the issue whether the trial court's judgment against them is contrary to the evidence and the...
To continue reading
Request your trial