Hill Petroleum Co. v. Pathmark Intern., Inc., 89-1256-C.

• Decision Date: 06 March 1991
• Docket Number: No. 89-1256-C.,89-1256-C.
• Citation: 759 F. Supp. 722
• Parties: HILL PETROLEUM COMPANY, Plaintiff, v. PATHMARK INTERNATIONAL, INC., Richard J. Boushka, Joan Boushka, Thomas M. Dower and Sue M. Dower, Defendants.
• Court: U.S. District Court — District of Kansas

759 F. Supp. 722

HILL PETROLEUM COMPANY, Plaintiff, v. PATHMARK INTERNATIONAL, INC., Richard J. Boushka, Joan Boushka, Thomas M. Dower and Sue M. Dower, Defendants.

No. 89-1256-C.

United States District Court, D. Kansas.

March 6, 1991.

Clifford L. Malone, Adams, Jones, Robinson and Malone, Wichita, Kan., for plaintiff.

Michael C. Gillespie, Foulston & Siefkin, Wichita, Kan., for defendants.

MEMORANDUM AND ORDER

CROW, District Judge.

Hill Petroleum Company (HPC) brings this diversity of citizenship action to recover money for petroleum products sold and delivered to defendant Pathmark International, Inc. The other named defendants are individuals who executed guarantees in favor of HPC. This matter comes before the court upon HPC's motion for summary judgment against Pathmark and the guarantors. The court, having considered the parties' briefs and the applicable law, is now prepared to rule.

Facts

Most of the facts of this case are undisputed. Hill Petroleum Company is incorporated under the laws of the state of Texas with its principal place of business in Greenwich, Connecticut. HPC sells petroleum products. Pathmark is incorporated under the laws of the state of Tennessee, with its principal place of business in Memphis, Tennessee. The defendants Richard J. Boushka, Joan Boushka, Thomas M. Dower, and Sue M. Dower are residents of the state of Kansas. Richard J. Boushka and Thomas M. Dower are principal owners of Pathmark. Thomas Dower became President and managing officer of Pathmark in August, 1987.

Apparently, HPC and Pathmark enjoyed an ongoing business relationship for several years. Pathmark purchased petroleum products from HPC for resale. After HPC delivered products to Pathmark, HPC would issue its invoice, often by fax. Payment was due in full twelve days later.

As security for Pathmark's payment, defendants Richard J. Boushka, Joan Boushka, Thomas M. Dower and Sue M. Dower executed guaranties in favor of HPC. Each of the guaranties had identical language. In pertinent part the guaranties provide:

In consideration of the extension of credit and/or financial accommodations to Pathmark International, Inc. (hereinafter referred to as "Customer") by Hill Petroleum, Inc. (hereinafter referred to as "Creditor") in connection with the sale by Creditor to Customer of, or agreement to sell, from time to time, oil products, petrochemicals and/or other goods, the undersigned, jointly and severally and in solido with Customer and any and all sureties and guarantors, irrevocably and unconditionally guarantee to Creditor upon demand the full, prompt and complete payment, without set-off, counterclaim or deduction, of all sums, without limit as to amount, which now are, or may hereafter become due and payable to Creditor, as a result of the failure of Customer to perform any obligations or pay any indebtedness due Creditor by Customer including without limitation, all damages, losses, costs, and expenses incurred by Creditor together with reasonable attorney's fees which are herein fixed at 25% of the balance due.

The undersigned waive notice of acceptance hereof, orders, sales and deliveries to Customer and the amounts and terms thereof, all defaults or disputes with the Customer, and the settlement or adjustment of such defaults or disputes. The undersigned, without affecting their liability hereunder in any respect, consent to and waive notice of all changes of terms, the withdrawal or extension of credit or time to pay, the release of the whole or any part of the indebtedness, the settlement or compromise of differences, the acceptance or release of security, the acceptance of notes, trade acceptances, or any other form of obligation for Customer's indebtedness, and the demand, protest, and notice of protest of such instruments or their endorsements. The undersigned agree that sureties or other guarantors may at any time be released in whole or in part from their obligations without consent of or notice to the undersigned who shall remain bound in solido for the entire amount of this guaranty. The undersigned also consent to and waive all notice and pleas of discussion and division, and notice of any arrangements or settlements made in or out of court in the event of receivership liquidation, readjustment, bankruptcy, reorganization, arrangement, or assignment for the benefit of creditors of Customer, and anything whatsoever, whether or not herein specified, which may be done or waived by or between Creditor and Customer. In the event of the occurrence of any of the foregoing, Creditor will be deemed to have reserved the right to enforce this Guarantee for the full unpaid balance of all indebtedness of Customer to Creditor without credit or reduction of such indebtedness with respect to any amount, share, quota or portion not actually collected by Creditor ...

The Dowers executed their guaranty on April 18, 1986. The Boushkas executed their guaranty on April 23, 1986.

On July 20, 1988, approximately two years later, HPC received more security in the form of an "Irrevocable Standby Letter of Credit." The standby credit amount was initially $600,000. The standby letter of credit was issued by MBank of Houston and confirmed by Citibank, N.A., New York, New York. The standby letter of credit, which was amended from time to time, was scheduled to expire on February 15, 1989.

During January and February of 1989, HPC sold and delivered petroleum products to Pathmark totaling $298,700.07. Between February 6, 1989, and February 8, 1989, Pathmark issued three checks to HPC totalling $164,715.52 in partial payment of that debt. The checks were drawn on MBank of Houston.

On or about February 9, 1989, Kenneth Tallevi, a credit analyst for HPC, spoke to Tricia Harrington at Pathmark about Pathmark's account. Harrington is an assistant to Dower. Harrington told Tallevi that the three checks had been mailed, leaving a balance of $133,984.55. Tallevi informed Harrington that the remaining balance would have to be paid on or before February 13, 1989, because the standby letter of credit was scheduled to expire on February 15, 1989.

On Monday, February 13, 1989, Tallevi was informed by HPC's accounts receivable department, via electronic transmission from First Chicago, that the three Pathmark checks totalling $164,715.52 had been received by HPC's First Chicago lock box account in Dallas and credited to HPC's account.

At this point, the parties' versions of the facts differ.¹ According to HPC, later on Monday, February 13, 1989, Dower called Tallevi and told him that Pathmark was unable to wire the remaining balance owed to HPC. Dower informed HPC that it should draw against the standby letter of credit. On February 15, 1989, HPC, not knowing that the checks totalling $164,715.52 would bounce, prepared the documentation required to draw $133,984.55 (the apparent balance of Pathmark's account) on the letter of credit. Therefore, on February 15, 1989, HPC believed that it had received payment for the entire $298,700.07 debt: $164,715.52 from the three Pathmark checks and $133,984.55 drafted from the letter of credit.

According to the defendants, on February 13, 1989, Dower advised Tallevi that MBank had dishonored Pathmark checks,² possibly including the three checks issued to HPC in partial payment of the debt. Dower directed Tallevi to draw against the standby letter of credit, specifically stating "draft the bastards." Dower intended his direction to draw against the standby letter of credit to serve as a direction to Hill to draft against the letter of credit for the full amount of Pathmark's debt to Hill. The defendants contend that this direction constituted a full tender of Pathmark's obligation, and that HPC, by not drafting the letter of credit against the full amount of Pathmark's debt, rejected full tender and thereby released the guarantors of their liability.

On Friday, February 14, 1989, HPC was informed for the first time by its bank, First Chicago, that the three checks from Pathmark totalling $164,715.52 had been returned for insufficient funds. Despite HPC's repeated requests for payment, the balance of Pathmark's account remains unpaid.

On May 16, 1989, HPC brought this suit against Pathmark and the guarantors to collect the unpaid balance of $164,715.52 plus statutory interest from February 8, 1989.

Summary Judgment

Summary judgment is appropriate when the movant can demonstrate that there is no genuine issue of material fact and is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986) (quoting Fed.R. Civ.P. 1). See Fed.R.Civ.P. 56(c).

HPC contends that the guarantors are jointly and severally liable for any amounts Pathmark failed to pay. HPC contends that, even assuming that Pathmark directed it to draft against the letter of credit in the full amount of the debt owed, the guaranties jointly and severally obligated the defendants to pay any amounts Pathmark owes. Pathmark responds that the guaranties are not "unconditional" and that the guaranties are ambiguous because they do not mention the "tender" defense, and thus are not dispositive, requiring submission of the issue to the trier of fact.

The Supreme Court of Kansas recently considered the definition and proper means of interpreting a guaranty.

A guaranty is a contract between two or more persons, founded upon consideration, by which one person promises to answer to another for the debt, default or miscarriage of a third person, and, in a legal sense, has relation to some other contract or obligation

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