Houin v. Bremen State Bank

• Decision Date: 28 July 1986
• Docket Number: No. 3-785A171,3-785A171
• Parties: Leo HOUIN, Defendant-Appellant, v. BREMEN STATE BANK, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 753

495 N.E.2d 753

Leo HOUIN, Defendant-Appellant, v. BREMEN STATE BANK, Plaintiff-Appellee.

No. 3-785A171.

Court of Appeals of Indiana,

Third District.

July 28, 1986.

Joseph V. Simanski, Plymouth, for defendant-appellant.

Mark E. Wagner, Kizer, Neu, Joyce, Wyland, Humphrey, Wagner & Gifford, Bremen, for plaintiff-appellee.

GARRARD, Judge.

Leo Houin (Houin), defendant below, appeals the Starke Circuit Court's decision to enforce a continuing guaranty executed by him on or about December 23, 1975 in favor of the Bremen State Bank (Bank). The contract guaranteed the present and future indebtedness of Houin's daughter and son-in-law Louise and Gary Webster (Websters). The guaranty document was prepared by the Bank, but it was executed at Houin's residence. From 1976 through 1979, loans were subsequently obtained by the Websters to finance their farming operations.

The trial court specifically found that in mid-June 1976, Houin went to the Bank and orally notified Hilton Swain, then Bank president, that he wanted no more money loaned to the Websters. There is no evidence that the Bank ever treated this action as a termination or ever acknowledged or accepted it as such, and on February 2, 1978, at the Bank's request, Houin furnished the Bank with his personal financial statement.

On November 23, 1979, a new note was executed by the Websters in the sum of $94,255.03. The Websters defaulted on the note and a suit to collect against the Websters and Houin, as guarantor, was commenced in the Marshall Circuit Court on April 27, 1980. Houin obtained an attorney and filed his answer and affirmative defenses. The Websters subsequently obtained approximately $30,000.00 from the Farmers Home Administration and the suit was dismissed by the Bank on August 22, 1980.

On August 26, 1980 a new note was executed which displayed the receipt of $30,000.00. No new funds were advanced. The Websters subsequently filed bankruptcy and were discharged. Notice of default and demand for payment was sent by the Bank to Houin by certified mail. On March 11, 1985 the trial court ordered judgment against Houin and in favor of the Bank in the sum of $163,789.15. Other facts as necessary will appear in the body of the opinion.

On appeal Houin presents us with the following issues:

I. Whether the trial court erred in refusing to dismiss the Bank's complaint for failure to comply with Indiana Rules of Procedure, Trial Rule 9.2(A).

II. Whether the trial court erred in finding that the Bank's complaint stated a cause of action.

III. Whether the Bank failed to make demand for payment upon Houin prior to the filing of the action.

IV. Whether the guaranty was supported by consideration, both initially and for subsequent loans.

V. Whether the guaranty in question was an unconscionable contract.

VI. Whether there was a valid termination of the guaranty by Houin.

VII. Whether there was a material alteration in the Websters' obligation which discharged Houin from all liability under the guaranty.

VIII. Whether the Bank failed to give Houin notice of default which discharged Houin from liability.

IX. Whether the doctrine of equitable estoppel applied to discharge Houin from liability.

We affirm.

I.

Initially, Houin raises as error the trial court's refusal to dismiss the Bank's complaint for failure to comply with Trial Rule 9.2(A). TR 9.2(A) provides that "[w]hen any pleading allowed by these rules is founded on a written instrument, the original, or a copy thereof, must be included in or filed with the pleading." It is clear that the Bank's claim is founded on the written guaranty signed by Houin, since the scope of Houin's duty is completely governed by the terms of this instrument. Thus, insofar as the Bank sought to bring an action on the guaranty, TR 9.2(A) required it to attach the continuing guaranty to its complaint. It is undisputed that the Bank did not do so.

The Bank's failure to comply with the pleading requirements of TR 9.2(A) does not, however, warrant dismissal of its complaint. Under the trial rules, the effect of noncompliance is governed by TR 9.2(F) TR 9.2(F) states in part that "[t]he court, in its sound discretion, may order compliance, the reasons for noncompliance to be added to the pleadings, or allow the action to continue without further pleading." (emphasis added) In this case, the trial court denied Houin's motion to dismiss and allowed the action to continue without further pleading. This cannot be held to be an abuse of discretion especially since Houin received a copy of the written guaranty as part of the Bank's requests for admissions. The case of Wilson v. Palmer (1983), Ind.App., 452 N.E.2d 426, cited by Houin did not contemplate dismissal on the merits, but dismissal with leave to amend which was not necessary here since Houin admitted that the written guaranty attached to the Bank's requests for admissions was a true and accurate copy.

II.

Houin also alleges that the Bank's complaint failed to state a cause of action upon which relief could be granted in that it failed to state that the principal debtors were in default. Indiana is a notice pleading state. Under notice pleading all that is required in a complaint is a clear and concise statement that will put the defendant on "notice" as to what has taken place and the theory that the plaintiff plans to pursue. Farm Bureau Insurance Company v. Clinton (1971), 149 Ind.App. 36, 269 N.E.2d 780. Attorneys for both parties will have ample opportunity in discovery to learn all facts necessary to fully represent the interests of their clients. 269 N.E.2d at 782-83. Thus, the elements required to state a cause of action are not required and the plaintiff is heavily favored so far as getting into court. Id. Through his interrogatories to the Bank, Houin learned that the Websters were in default. Therefore, the trial court did not err by denying Houin's motion to dismiss for failure to state a claim.

III.

Houin argues that the Bank failed to demand payment from him as guarantor as required by the continuing guaranty. In assessing Houin's arguments, we will not weigh the evidence. We will consider only whether the evidence favorable to the judgment was sufficient to support the decision. Courtesy Enterprises, Inc. v. Richards Labs (1983), Ind.App., 457 N.E.2d 572, 575. In this case, the Bank sent Houin a demand letter before instituting action on the continuing guaranty, and two days later the Bank received a certified mail receipt card signed by Houin. Moreover, in his answers to the Bank's requests for admissions, Houin admitted receiving formal demand for payment. Thus, the evidence favorable to the judgment is sufficient to support the trial court's decision that demand for payment was made upon Houin.

IV.

Houin contends that there was insufficient consideration for the execution of the guaranty, both initially and for subsequent loans made to the Websters. For consideration to exist, it is not necessary for the guarantor to derive any benefit from the principal contract or the guaranty. Loudermilk v. Casey (1982), Ind.App., 441 N.E.2d 1379, 1385. If a guaranty is made at the time of the contract to which it relates, so as to constitute part of the consideration for the contract, sufficient consideration exists. Id. at 1384; Davis v. B.C.L. Enterprises, Inc. (1980), Ind.App., 406 N.E.2d 1204. For instance, there is consideration where the guaranty induces the promisee to execute the main contract with the principal. 441 N.E.2d at 1385.

In this case, the continuing guaranty was signed by Houin at the insistence of the Bank. Moreover, in his answers to the Bank's requests for admissions, Houin admitted that the continuing guaranty was executed to induce the Bank to extend credit to the Websters. Thus, the undisputed facts demonstrate that consideration did exist, and the continuing guaranty was effective until revoked, or until extinguished by some rule of law. Vidimos, Inc. v. Vidimos (1983), Ind.App., 456 N.E.2d 455, 458.

V.

Both parties cite Weaver v. American Oil Co. (1971), 257 Ind. 458, 276 N.E.2d 144 in dealing with the alleged error of unconscionability of the guaranty contract. A contract may be declared unenforceable due to unconscionability when there is a great disparity in bargaining power which leads the party with the lesser power to sign a contract unwillingly or unaware of its terms. Dan Purvis Drugs, Inc. v. Aetna Life Ins. (1980), Ind.App., 412 N.E.2d 129, 131. Further, as stated in Weaver, a contract is unconscionable if it is "such as no sensible man not under delusion, duress or in distress would make, and such as no honest and fair man would accept." 276 N.E.2d at 146.

While a disparity in bargaining power did exist between the Bank and Houin, it cannot be said that this disparity lead Houin to sign the guaranty unwillingly or unaware of its terms. Unlike Weaver, no agent of the Bank was present requesting Houin to "sign" the guaranty. Instead, Houin was in the comfort of his own home surrounded only by family members. Secondly, the instrument was plainly entitled "CONTINUING GUARANTY." The term itself would clearly disclose that the instrument contemplated a series of transactions. Furthermore, unlike the service station operator in Weaver, Houin clearly was in a position to shop around for better terms or directly loan the Websters the money to get started as farmers. Indeed there was no evidence presented that he either objected to or sought any modification whatever in the terms of the guaranty. Upon the record it is no more than conjecture that the Bank would have been unwilling to make any modifications to the proposed guaranty.

Houin also alleges that the guaranty is unconscionable in form in that no limit as to time or amount of loans was set and the contract called for Houin to waive notice of future loans. While it is true that the guaranty was prepared by the Bank and contained terms which were...