Hoffman v. Franklin County Mercantile Bank

• Decision Date: 14 February 1984
• Docket Number: No. 46751,46751
• Citation: 666 S.W.2d 446
• Court: Missouri Court of Appeals
• Parties: Charles L. HOFFMAN and Merily J. Hoffman, his wife, Appellants, v. FRANKLIN COUNTY MERCANTILE BANK, and Bruce A. Smith and Harry L. Wilson, Respondents.

Page 446

666 S.W.2d 446

Charles L. HOFFMAN and Merily J. Hoffman, his wife, Appellants, v. FRANKLIN COUNTY MERCANTILE BANK, and Bruce A. Smith and Harry L. Wilson, Respondents.

No. 46751.

Missouri Court of Appeals,

Eastern District,

Division Six.

Feb. 14, 1984.

Fred Roth, St. Louis, for appellants.

James W. Erwin, St. Louis, for defendants Franklin County Bank and Bruce A. Smith.

Walter A. Murray, Jr., Union, for defendant Wilson.

Before REINHARD, P.J., and CLARK and MOORE, Special Judges.

DONALD B. CLARK, Special Judge.

Appellants, husband and wife, claimed actual and punitive damages from respondents, Franklin County Mercantile Bank and Bruce A. Smith, and from a third defendant, Harry L. Wilson. The claim was based on the exposure of appellants to personal liability as a consequence of a failed business venture. The trial court dismissed the case for failure to state a cause of action and this appeal followed.

Initially, the reader will require some identification of the parties and their participation in the events giving rise to this litigation which has deteriorated into confusion. Notwithstanding the contention of appellants that factual issues persist, the following details are established by uncontroverted pleadings, affidavits and exhibits.

In 1977, appellant Charles Hoffman and others established Meramec Sports Center, Inc. to engage in the business of selling recreational vehicles. Respondent Smith, an attorney, was retained and handled the legal work of organizing the corporation. Funds for the venture were loaned to the corporation by respondent Franklin County Mercantile Bank and underwritten by the Small Business Administration. Hoffman and his wife personally subscribed to repayment of the loan and additionally executed a second deed of trust on their residence as collateral.

Meramec Sports Center conducted business for approximately one year, apparently under the management of Hoffman and Harry L. Wilson, another of the parties to this suit. The debt of Meramec continued to mount as respondent bank made additional advances and Hoffman became concerned. He notified Wilson and others in the business that he intended to withdraw. On February 15, 1979, a meeting of the directors of Meramec was held and Wilson was elected president of the corporation replacing Hoffman. Meramec continued in business thereafter until June 1, 1979 when the bank declared its loans to be in default and seized the Meramec assets.

When respondent Smith rendered services in the incorporation of Meramec, he was in private law practice. Among his clients at the time was respondent bank. On August 1, 1979, Smith left private practice and accepted employment by the bank as trust officer and general counsel.

Appellants' suit against the bank is grounded upon two asserted causes. In the first, appellants claim damages suffered when the bank negligently extended credit to Meramec on loans guaranteed by appellants at a time when the bank knew or should have known Meramec was insolvent. The second claim is based on a breach by the bank of its agreement to release the second deed of trust given on appellants' residence. As to respondent Smith, appellants claim he is liable to them for his negligence in failing to discharge his duties as attorney and in unethically representing conflicting interests in the loan transactions between the bank and Meramec.

Resolution of this appeal has presented a formidable task for several reasons. Appellants have failed to supply this court with an adequate record, their brief misstates some portions of the record supplied and the points on appeal do not comply with Rule 84.04(d) because the points do not set out wherein and why it is contended the trial court erred in dismissing the petition. Respondents, however, have filed no motion for relief on account of these deficiencies and we have therefore undertaken to address the merits of the case as best that result can be accomplished under the handicap of the presentation.

Before considering the points on appeal the procedural history of the case must be recited. In doing so, some assumptions are indulged necessitated by the lack of a complete record. This deficiency is, no doubt, attributable to appellants' erroneous approach to the case as merely a suit for damages. In fact, appellants' claims are interrelated with and, by the court's order of consolidation, integrated into a suit commenced much earlier by Borg Warner Acceptance Corporation and Meramec State Bank against respondent, Franklin County Mercantile Bank and Meramec Sports Center.

Despite the order of consolidation the record supplied on this appeal contains none of the pleadings in the Borg Warner case, with the sole exception of the cross-claim and third party claim filed there by respondent bank. Indeed, were it not for a supplemental legal file furnished by respondents, this record would have furthered the assumption, indulged by appellants, that they pursue an independent action in negligence for damages. The significance of this distinction in the analysis of the case will become apparent.

Drawing upon the cross-claim and third party claim as the basis for information, it appears the Borg Warner suit over Meramec Sports Center obligations was commenced in mid-1979. Franklin County Bank filed its cross-claim and third party claim September 18, 1979. The cross-claim sought judgment over against Meramec Sports Center for its own debts. The third party claims asked relief against appellants and the other third party defendants as personal guarantors of the Meramec Sports Center indebtedness incurred through loans made by the bank.

There is no question but that the loans upon which appellants predicate their cause of action in damages are the same loans respondent bank asserted in its third party petition to be the obligations of appellants as guarantors. If appellants had any basis to contend respondent bank had acted improperly in extending credit to Meramec Sports Center, such a claim would constitute an affirmative defense to the third party suit and not a ground for this independent action filed more than one year after the Borg Warner case was apparently at issue.

The difficulty with the inadequate record here is illustrated by our inability to ascertain whether appellants did in fact interpose the affirmative defense to the third party suit. Of course, if they did so, the present petition would be duplicitous to the extent of the claim that appellants' guarantor liability had been negligently exposed. Moreover, appellants' separate claim for damages on that count is at best premature because they have not yet suffered monetary loss by payment of Meramec debts under the guaranty in question. ¹

An additional handicap to consideration of this appeal is the absence from the record of the document or documents under which appellants guaranteed to the bank the repayment of Meramec debts. Without that record, this court can only indulge the same assumptions as the parties evidence by their briefs, that is, appellants executed a personal obligation for future advances made by the bank to Meramec Sports Center, the continuing guaranty was revocable at any time upon notice by the guarantors, but no notice of revocation was given.

The question of duplicity between the pending third party suit by the respondent bank as plaintiff and the separate suit commenced by appellants was addressed by the court in an order made July 23, 1982. The trial court there ordered appellants' suit consolidated with the Borg Warner case. The motion upon which the order was based asked, and the order presumably directed, that the cause be treated as a counterclaim against respondent bank. While appellants' claim that the bank breached its agreement to release the deed of trust would constitute a counterclaim, the remaining allegations against the bank do not amount to a counterclaim but rather state affirmative defenses to the bank's third party suit. Moreover, the separate counts against respondent Smith state separate issues related to the affairs of Meramec Sports Center but introduce Smith as a new party to the litigation.

As will hereafter appear, this opinion concludes that appellants have stated no cause against respondent bank for breach of contract and no cause against respondent Smith on any sustainable theory. It is therefore unnecessary to deal with the question of how the order of consolidation should be recast. It is sufficient for this opinion to state that appellants' petition was properly dismissed, but that appellants retain any defenses heretofore or hereafter properly pleaded in their answer to the third party petition of respondent bank.

I.

The points on appeal will be treated in the same order first outlined in this opinion, distinguished by the identity of the causes asserted. These are the claim the bank improperly extended credit to Meramec; the claim the bank breached its agreement to release the deed of trust and the claim of negligence and malpractice against Smith.

The judgment appealed is the order of the trial court sustaining respondents' motions to dismiss or for summary judgment. No findings were made and the order did not indicate which of the alternative motions was granted. The order was designated final for purposes of appeal under Rule 81.06. We treat the disposition, however, as summary judgment because affidavits supporting...