Loudermilk v. Casey, 1-182A1

• Decision Date: 16 November 1982
• Docket Number: No. 1-182A1,1-182A1
• Parties: John V. LOUDERMILK, Defendant-Appellant, v. Lawrence J. CASEY and Alvin M. Weintraub, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 1379

441 N.E.2d 1379

John V. LOUDERMILK, Defendant-Appellant, v. Lawrence J. CASEY and Alvin M. Weintraub, Plaintiffs-Appellees.

No. 1-182A1.

Court of Appeals of Indiana First District.

Nov. 16, 1982.

Stephen M. Gentry, Indianapolis, Melvin R. Lind, Lind, Deckard & O'Brien, Danville, for defendant-appellant.

Theodore J. Nowacki, Bose, McKinney & Evans, Indianapolis, John M. Howard, Jr., Howard & Lawson, Danville, for plaintiffs-appellees.

NEAL, Judge.

STATEMENT OF THE CASE

Lawrence J. Casey (Casey) and Alvin M. Weintraub (Weintraub), the plaintiff-appellees, filed this action in the Hendricks Circuit Court to recover on guaranties executed by John V. Loudermilk (Loudermilk), the defendant-appellant. Loudermilk had guaranteed payment of two promissory notes of Wernert J. Pitterich (Pitterich) which Pitterich issued in order to purchase stock under a written agreement with Casey and Weintraub. The trial court entered summary judgment in favor of Casey and We affirm in part and reverse and remand in part.

Weintraub in the amount of $32,261.84 plus $4,000 for attorneys' fees. Loudermilk appeals, raising several issues regarding the interpretation of the guaranties and the award of attorneys' fees.

STATEMENT OF THE FACTS

Casey, Weintraub and Pitterich were three of the twelve shareholders of Fleetwood Investment Company (Fleetwood), a Michigan corporation. Fleetwood's only assets were the issued and outstanding capital stock of A.C.E. Freight, Inc. (A.C.E.), an Ohio corporation which held an operating certificate and operated as a motor common carrier pursuant to authority issued by the Interstate Commerce Commission. Pitterich entered into a sale agreement with the other eleven Fleetwood shareholders whereby he agreed to purchase all of their shares of Fleetwood stock. The trial court made the following findings of fact regarding the sale of the stock.

"1. On or about December 18, 1974, Wernert J. Pitterich ('Pitterich') entered into a written agreement with the owners of 80% of the capital stock of Fleetwood Investment Company ('Fleetwood'), wherein Pitterich, who was then the owner of 20% of Fleetwood's stock, agreed to purchase all of the other outstanding shares of Fleetwood. The Plaintiffs, who each owned 3.75% of such stock, were parties to such agreement.

2. In consideration of the sale of the Plaintiffs' stock to Pitterich, Pitterich promised to pay to each of the Plaintiffs the sum of $22,500 in 107 equal successive monthly installments, together with interest at the rate of 6% per annum. Pitterich's obligation to the Plaintiffs to pay the purchase price was evidenced by promissory notes dated December 18, 1974 (the 'Notes') under which Pitterich assumed no personal liability. Instead, the Notes were secured by a pledge of the Fleetwood stock being purchased, as evidenced by a written pledge agreement dated December 18, 1974 and by written guaranties of the Defendant, John V. Loudermilk ('Loudermilk'), in favor of the Plaintiffs, under the express terms of which Loudermilk unconditionally and primarily guaranteed the payment of the Notes (the 'Guaranties').

3. Under the terms of the pledge agreement, Pitterich retained all rights of ownership in the Fleetwood stock, including the right to vote such stock.

4. There is due and owing to each of the Plaintiffs as of July 17, 1981 the sum of $16,130.92, as follows:

                Principal  $14,299.08
                Interest     1,831.84
                            ---------
                TOTAL:     $16,130.92"
                

Of all the shareholders only Casey and Weintraub demanded any security in addition to the stock and the notes. Loudermilk executed two guaranties, one to Casey and one to Weintraub, ¹ on December 18, 1974. These guaranties read as follows:

"AGREEMENT, by and between Lawrence Casey and John Loudermilk of Indianapolis, Indiana.

WHEREAS, Casey, as a stockholder of Fleetwood, has entered into a contract with Wernert Pitterich for the sale of his 3,750 shares of Fleetwood to said Pitterich; and

WHEREAS, in order to induce Casey to execute the agreement for the sale of his stock, and to accept the promissory note of Pitterich of even date herewith, Loudermilk has agreed to guarantee the payment of Pitterich's obligation to Casey as evidenced by said promissory note.

NOW, THEREFORE, in consideration of the payment of $1.00 by Casey to Loudermilk, and other good and valuable consideration, Loudermilk unconditionally and primarily guarantees the payment of the promissory note of Pitterich of even date herewith made in favor of said Casey /s/ John V. Loudermilk"

and each installment thereof, together with the interest provided therein, in accordance with the terms and conditions of said promissory note.

On or about November 16, 1976, Pitterich and Loudermilk ended their business relationship, and on November 17, 1976, Pitterich executed an indemnification agreement to Loudermilk with specific reference to the guaranties. After November 17, 1976, Pitterich sold the operating authority of A.C.E. to Kroblin Transportation Systems, Inc. (K.T.S.). In effect, this sale gave K.T.S. the practical power to control Fleetwood. K.T.S. assumed Pitterich's obligation to Casey and Weintraub and continued making payments through June 1979, after which time the payments ceased. In December 1979, Casey and Weintraub sent to Loudermilk their written demand for payment of the balance due on the notes. Loudermilk made no payment, and this action was filed.

Casey and Weintraub filed a motion for summary judgment with accompanying affidavits, and Loudermilk filed affidavits in response. Loudermilk's affidavit stated that he had provided financial assistance to Pitterich in the latter's operation of A.C.E. Loudermilk stated he was informed that Casey and Weintraub would not sell their shares without guaranties from him, and he executed the guaranties at the same time the other documents were executed. According to his affidavit,

"... It was agreed by all the parties to these documents that Pitterich would not be personally liable thereunder, but that all installments would be paid out of the profits derived from his operation of A.C.E. Freight, Inc. If the profits were not sufficient to pay the installment payments and Pitterich defaulted thereon, the Sellers would re-acquire their Fleetwood stock from the escrow agent. The reacquisition of the stock was to be the Seller's sole remedy under the Sales Agreement in case of default. The execution of the guaranty agreements was to satisfy the Plaintiffs that Affiant could obtain no greater right to the Fleetwood Stock than Pitterich. Conversely, I was to assume no greater liability than Pitterich."

The affidavit further stated the bases of Loudermilk's affirmative defenses of payment, release, and lack of consideration.

The trial court entered summary judgment in favor of Casey and Weintraub.

ISSUES

Loudermilk raises nine issues for our review, and we condense those nine into the following six:

I. Whether the terms of the guaranty are ambiguous and therefore create a genuine issue of material fact which cannot be resolved by summary judgment;

II. Whether as a matter of law Loudermilk was personally liable for the unpaid balance of the promissory notes when Pitterich was not personally liable on the notes;

III. Whether Loudermilk's affidavit created a genuine issue of material fact regarding his defense of lack of consideration;

IV. Whether Loudermilk's affidavit created a genuine issue of material fact regarding his defense of release;

V. Whether Loudermilk's affidavit created a genuine issue of material fact regarding his defense of payment; and

VI. Whether the court's award of $4,000 in attorneys' fees was excessive.

DISCUSSION AND DECISION

We begin by stating our standard of review for summary judgments. Summary judgment should be granted only where the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits, and testimony reveal that no genuine issue exists as to any material fact and the moving party is entitled to judgment as a matter of law. Boswell v Lyon, (1980) Ind.App., 401 N.E.2d 735; Huntington Mutual Insurance Company v. Walker, (1979) Ind.App., 392 N.E.2d 1182; Ind.Rules of Civil Procedure, Trial Rule 56(C). A fact is material if it tends to facilitate the resolution of any issue. Stuteville v. Downing, (1979) Ind.App., 391 N.E.2d 629. In deciding whether such a factual issue exists, the court must accept as true all facts alleged by the nonmoving party and resolve all doubts in his favor. All reasonable inferences must also be resolved in favor of the nonmoving party. Boswell, supra; Huntington, supra. If the facts give rise to conflicting inferences which could affect the result, summary judgment is inappropriate. Carrell v. Ellingwood, (1981) Ind.App., 423 N.E.2d 630. On review we must determine whether there is any material factual issue and whether the law has been applied correctly. Ang v. Hospital Corporation of America, (1979) Ind.App., 395 N.E.2d 441.

Issue I. Ambiguity of guaranty

Loudermilk asserts that the scope of his liability was not clearly described by the guaranty. Therefore, the instrument is ambiguous, and its meaning is a question for the jury. Loudermilk states that when the guaranty, sales agreement, promissory note, and pledge agreement are considered together, it appears that certain remedies and obligations conflict. Specifically, the promissory notes and the pledge and sale agreements limit Pitterich's liability to the return of the collateral (Fleetwood stock) while the guaranty provides a further remedy, that is, Loudermilk's unconditional and primary guarantee of payment of the note "in accordance with the terms of the promissory note." Loudermilk also asserts that the court did consider extrinsic evidence offered by Casey and Weintraub, but failed to consider Loudermilk's affidavit. Loudermilk says that the court improperly weighed the evidence while...