Halpin v. Frankenberger, 53483

• Decision Date: 08 May 1982
• Docket Number: No. 53483,53483
• Citation: 231 Kan. 344,644 P.2d 452
• Parties: , 34 UCC Rep.Serv. 189 Thomas HALPIN, Appellant, v. Phillip FRANKENBERGER and Topeka Bank & Trust, a corporation, Appellees.
• Court: Kansas Supreme Court

Page 452

644 P.2d 452

231 Kan. 344, 34 UCC Rep.Serv. 189

Thomas HALPIN, Appellant, v. Phillip FRANKENBERGER and Topeka Bank & Trust, a

corporation, Appellees.

No. 53483.

Supreme Court of Kansas.

May 8, 1982.

Syllabus by the Court

1. Rules relating to the determination of whether a party to an appeal has acquiesced in the judgment of the trial court stated and applied.

2. K.S.A. 84-3-606(1) does not apply to a party who is not a party to the instrument in question.

3. K.S.A. 84-9-207 requires a creditor to preserve collateral in his possession so as not to injure the person who has given that collateral.

4. A surety or guarantor, on paying the debt of the principal, is entitled to be subrogated to the rights of the creditor in all or any of the securities, means or remedies which the creditor has for enforcing payment against the principal debtor or against other sureties or guarantors.

5. Absent agreement to the contrary, one co-guarantor has a common law right of contribution from his co-guarantor.

6. In an action by one co-guarantor against a creditor who released certain security pledged by another guarantor of the same debt, the record is examined and it is held that on the facts as set forth in the opinion the trial court did not commit error in granting summary judgment in favor of the creditor.

Frank M. Rice, of Jones, Schroer, Rice, Bryan & Lykins, Topeka, argued the cause, and Dan L. Wulz, Topeka, of the same firm, was with him on the brief for appellant.

L. M. Cornish, of Glenn, Cornish, Schulteis & Hanson, Chartered, Topeka, argued the cause and Gregory F. Maher, Topeka, of the same firm, was with him on the brief for appellees.

HOLMES, Justice:

Plaintiff Thomas Halpin appeals from an order of the district court sustaining a motion for summary judgment filed by the defendant Topeka Bank & Trust, a Kansas banking corporation (the bank). The appeal involves the rights and duties existing between a guarantor and a creditor. Summary judgment was also granted to plaintiff against the other defendant Phillip Frankenberger and no appeal has been taken by Frankenberger from that ruling.

In 1975, Halpin and Frankenberger met and decided to go into the carpet business. They formed Centennial Carpet Sales, Inc., a Kansas corporation (Centennial), and each owned 500 shares of stock based upon a capital contribution of $5,000.00 each. Halpin was to be the administrative head of the venture and Frankenberger was to handle the sales end of the business. In order to operate, the corporation needed a line of credit and the two principals approached the defendant Topeka Bank & Trust to obtain it. The bank was agreeable but required security and personal guaranties from both Halpin and Frankenberger.

Halpin and his wife executed their guaranty to the bank on August 29, 1975, and a security agreement to the bank covering listed quality common stocks having a market value of nearly $200,000.00. Frankenberger and his wife executed their guaranty on September 9, 1975, and a security agreement on the cash value of certain life insurance policies in an amount of approximately $7,000.00, a 1976 Ford automobile, a 1970 Volkswagen automobile, and a second mortgage on their home in an amount of $16,000.00. The mortgage was duly filed with the Shawnee County Register of Deeds office. Centennial was also required to furnish a security agreement on its accounts receivable, inventory, equipment, etc.

The guaranty executed by the Halpins was in the following form:

"CONTINUING GUARANTY AGREEMENT-INDIVIDUAL

To Topeka State Bank and Trust Company

TOPEKA, KANSAS

"For value received, and in consideration of loans and/or advancements now made, or to be made hereafter by TOPEKA STATE BANK AND TRUST COMPANY, Topeka, Kansas, hereinafter referred to as Bank, to ____________________, hereinafter referred to as Debtor, and in consideration of such additional loans and/or advances as Bank may hereafter make to Debtor, the undersigned, ____________________, hereby agrees to pay and hereby guarantees payment to Bank of any and all obligations, including principal, interest and penalties, which Debtor now owes or may hereafter owe to Bank, including all renewals and/or extensions thereof.

"This promise to pay and guaranty is an open and continuing one, and includes all renewals and extensions of indebtedness now owed, or which may hereafter be owed by Debtor to Bank.

"Demand, protest, notice of nonpayment and notice of any extensions are hereby expressly waived, and the giving of notice of any making, renewal or extension of any note or indebtedness is also hereby expressly waived.

"This guarantee shall be binding on the undersigned and the heirs and assigns of the undersigned without resort by Bank to Debtor or to any other party prior to the payment hereof by the undersigned.

"The undersigned reserves the right to terminate this guaranty as to future loans or advances, but such termination shall be effective only by written notice served upon an officer of Bank. In the event of such termination, this guaranty shall nevertheless remain in full force and effect and shall be binding upon the undersigned for all the loans and advancements, including interest, penalties and accumulations thereon, made prior to receipt of such written notification, and shall also remain binding for all renewals or extensions of any prior loans and advancements.

"Executed on this day of , 19."

The Frankenberger guaranty was in essentially the same form.

By the summer of 1977, the indebtedness of Centennial to the bank exceeded $200,000.00 and it became apparent to all concerned that the business could not survive. The corporation was insolvent and the two stockholders started liquidation of the business in July, 1977, and ceased doing business in August of the same year. On September 23, 1977, Centennial owed the bank $187,000.00 plus interest and on that date $164,000.00 was paid to the bank from the sale of a portion of Halpin's securities pledged as security with the bank. Frankenberger decided to leave town and requested the bank to release the second mortgage on his home so it could be sold. On November 29, 1977, the bank released the second mortgage and Frankenberger subsequently received about $29,000.00 for the equity in his home. Halpin was not advised of the request to release the mortgage and did not learn the mortgage had been released until sometime in the spring of 1978. In March, 1978, the balance of approximately $23,000.00 owed the bank was paid. Frankenberger never paid any amount to the bank or to Halpin for his share of the indebtedness.

After Halpin discovered that the bank had released the second mortgage and that Frankenberger had no intention of paying his share of the debt, Halpin filed suit against both Frankenberger and the bank. Plaintiff sought relief on three causes of action: (1) A judgment for contribution from Frankenberger for one-half of $138,169.20, the amount paid by Halpin, (2) a judgment setting over to plaintiff all of the security pledged by Frankenberger and deposited with the bank, and (3) judgment against the bank for the difference between the sales price of Frankenberger's house and the balance due on the first mortgage, which amount was approximately $29,000.00.

Following the filing of the petition, the bank, after seeking instructions from the court, turned over to the clerk of the court the Frankenberger insurance policies and the title to the Volkswagen automobile. That was the extent of the Frankenberger security still held by the bank. After discovery plaintiff moved for summary judgment on all three claims. Defendant bank moved for summary judgment on the third claim. In sustaining plaintiff's motion on its first two claims, the court, in a memorandum opinion, stated:

"(I)t is the opinion of the Court that the Motion of the plaintiff for summary judgment should be sustained as to defendant Frankenberger and that plaintiff is entitled to judgment against the defendant Frankenberger in the sum of $69,084.60, together with the costs of this action.

"The judgment of the Court is that plaintiff is entitled to be equitably subrogated to all of the right, title and interest of the defendant bank and to be substituted as secured party for all securities held by the defendant bank at the time the plaintiff paid the obligations of Centennial in full."

Those rulings were not appealed from and the question of the judgment against Frankenberger and Halpin's right to contribution are not issues on appeal. Neither is the determination that Halpin was subrogated to all security still held by the bank.

On plaintiff's claim for damages against the bank for releasing the Frankenberger second mortgage and thereby impairing Halpin's right to subrogation, the court sustained the bank's motion for summary judgment on the theory that while plaintiff was subrogated to the bank's rights in the Frankenberger security, the right of subrogation did not arise until the bank had been paid in full. As there was still $23,000.00 owed the bank at the time it released the mortgage, plaintiff's rights of subrogation had not accrued and the bank had no duty at that time to preserve the security for the benefit of plaintiff.

Halpin has appealed from the latter ruling of the court granting summary judgment to the bank. No appeal has been taken by Frankenberger on the first two claims of the plaintiff. At the outset we are faced with the argument of the bank that plaintiff has acquiesced in the judgment of the trial court and therefore this appeal is barred. After the appeal had been perfected in this case, the plaintiff filed a motion in district court seeking to have the remaining Frankenberger security set over to him. The motion was granted and apparently plaintiff received from the clerk the insurance policies and car title. Appellee contends this precludes plaintiff from pursuing this appeal. We disagree. In ...