Premier Bank v. Cohen-Esrey Properties, Inc.

• Decision Date: 14 July 1994
• Docket Number: No. 93-2290-JWL.,93-2290-JWL.
• Citation: 859 F. Supp. 1388
• Parties: PREMIER BANK, Plaintiff, v. COHEN-ESREY PROPERTIES, INC., et al., Defendants.
• Court: U.S. District Court — District of Kansas

859 F. Supp. 1388

PREMIER BANK, Plaintiff, v. COHEN-ESREY PROPERTIES, INC., et al., Defendants.

No. 93-2290-JWL.

United States District Court, D. Kansas.

July 14, 1994.

David C. Stout, Charles S. Scott, Jr., Chionuma & Associates, P.C., Kansas City, MO, for F.D.I.C.

Richard L. Martin, Cynthia C. Dunham, Martin, Leigh & Laws, Kansas City, MO, for Premier Bank.

Greer S. Lang, Leonard B. Rose, Rose, Brouillette & Shapiro, P.C., Kansas City, KS, for defendants.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

I. Introduction

This case involves claims brought by plaintiff Premier Bank¹ against defendants Cohen Properties, Inc., Cohen-Esrey Properties, Inc., Roger L. Cohen, David M. Lacy and William K. Stapp. The action includes claims against the corporate defendants seeking judgment for breach of payments due on a promissory note and foreclosure on mortgaged property, and claims against defendants Cohen, Lacy and Stapp for breach of Payment Guaranties executed on January 29, 1988 and October 18, 1988.

This matter is currently before the court on plaintiff's motion for summary judgment (Doc. # 80). In its motion, plaintiff seeks summary judgment on all claims against defendants. For the reasons set forth below, plaintiff's motion is granted as to the breach of contract and foreclosure claims against the corporate defendants and as to the October 18, 1988 guaranty claims against the individual defendants.²

Also pending before the court are defendants' motion to strike (Doc. # 100) and defendants' motion for leave to file a sur-reply (Doc. # 104). For the reasons set forth below, those motions are denied.

II. Factual Background

A. Procedural Background

In order to understand how the parties arrived at their present posture in the case, a short review of the factual circumstances leading up to the filing of the case and the subsequent procedural developments in the case is necessary.

This action was originally filed by Midland Bank of Overland Park in the District Court of Johnson County, Kansas, on December 8, 1992. On March 21, 1993, the name of Midland Bank of Overland Park was changed to its former name of College Boulevard National Bank ("College Boulevard").

On April 2, 1993, the United States senior deputy comptroller for the bank's supervision policy found College Boulevard to be insolvent and appointed the FDIC as receiver. On that same date, the appointment was accepted by the FDIC. On June 28, 1993, by order of the District Court of Johnson County, Kansas, the FDIC was substituted as party plaintiff in the place of Midland Bank of Overland Park. In July, 1993, this case was removed from the District Court of Johnson County to this court.

The original petition filed in state court by Midland Bank of Overland Park asserted claims against defendant Cohen-Esrey for liability arising under a Promissory Note dated January 29, 1988 and subsequent modifications of that Promissory Note, and to foreclose the Mortgage, Security Agreement and Assignment of Rents securing the same. Liability was also asserted against defendants Cohen, Lacy and Stapp on individual payment guaranties executed on January 29, 1988.

This court issued a scheduling order on September 29, 1993. Pursuant to that order, any motions to amend the pleadings or to add parties were to be filed on or before October 29, 1993. That date came and went without any amended pleadings being filed by the parties. Meanwhile, discovery in the case continued. At a point in time after the deadline for filing amended pleadings established in the court's scheduling order had passed, the FDIC became aware that payment guaranties had been executed by defendants Cohen, Lacy and Stapp dated October 18, 1988. These new guarantees were executed concurrently with a modification of the original Promissory Note wherein the amount of indebtedness owed by Cohen-Esrey was increased to the amount of $2,100,000.00. The FDIC subsequently located executed copies of the October 18, 1988 guaranties in the file of Kent Perry, who had been the attorney for College Boulevard in the loan transactions.

Following its discovery of the October 18, 1988 payment guaranties, the FDIC filed a motion for leave to file an amended complaint, which included a count based on those guaranties. The court took up this motion at a pre-trial conference on March 13, 1994. Following a thorough examination of the factual circumstances leading to the FDIC's filing of the motion to amend, the court determined that the FDIC should be allowed to amend their complaint pursuant to Fed. R.Civ.P. 15, and the FDIC's motion to amend was granted.

B. The Cohen-Esrey Loan

On or about January 29, 1988, College Boulevard loaned $1,750,000.00 to Cohen Properties, Inc. ("Cohen Properties"). In consideration for that loan, Cohen Properties executed a promissory note dated January 29, 1988 to College Boulevard in writing wherein Cohen Properties promised and agreed to pay to College Boulevard the sum of $1,750,000.00, plus interest, at the contract rate stated in the promissory note. To secure the payment of the promissory note, and at the same time and as part of the same transaction, Cohen Properties³ executed and delivered to College Boulevard a mortgage bearing the date January 29, 1988.

In mid-1988, the development plans for the real estate which originally served as security for the loan changed, and to accommodate this change, lots 3 and 4 of the development had to be replatted. Part of lot 3 was conveyed by Cohen-Esrey to 135-150 Development Company, and 135-150 Development Company conveyed part of lot 4 to Cohen-Esrey. As a result of the change in construction plans, Cohen-Esrey needed an additional $350,000.00 in construction financing from College Boulevard. On or about October 18, 1988, Cohen-Esrey and College Boulevard entered into a Modification of Promissory Note wherein the parties agreed to modify the January 29, 1988 promissory note by increasing the amount of the indebtedness owed by Cohen-Esrey to College Boulevard to the amount of $2,100,000.00.

To secure the payment of the Modification of Promissory Note, Cohen-Esrey and College Boulevard entered into a Modification of Mortgage to grant College Boulevard a security interest in the real estate corresponding to the modified development. As part of the transaction, 135-150 Development Company and Arapaho I, L.P. agreed to subordinate any interest they had in the real estate described in the Modification to the interests of College Boulevard.

After October 18, 1988, the maturity date for the loan between Cohen-Esrey and College Boulevard was extended and modified several times, with a final maturity date of November 1, 1992. Cohen-Esrey is now in default on the loan. Demand for payment has been made and refused. As of March 22, 1994, $1,482,107.10 is due in principal on the Cohen-Esrey loan and its modifications, and $295,132.61 is due in accrued interest for a total amount due of $1,777,239.71. From March 22, 1994 forward, interest is accruing at the rate of $432.281237 per day.

C. The Payment Guaranties

In conjunction with the January 29, 1988 Cohen-Esrey loan, defendants Cohen, Lacy and Stapp each delivered executed payment guaranties to College Boulevard (the "January 29, 1988 Payment Guaranties"), which personally guaranteed payment of the January 29, 1988 Promissory Note. Additionally, as part of the modification of the original loan on October 18, 1988, defendants Cohen, Lacy and Stapp each executed new guaranties (the "October 18, 1988 Payment Guaranties") which personally guaranteed payment of the modified note. The January 29, 1988 Payment Guaranties and the October 18, 1988 Payment Guaranties contained language to the effect that the Payment Guaranties were absolute, unconditional and irrevocable. Further, pursuant to those Guaranties, the guarantors waived diligence, presentment for payment, notice of nonpayment, demand, protest and notice of acceptance.

In connection with the October 18, 1988 modification, College Boulevard returned the originals of the January 29, 1988 Payment Guaranties to defendants Cohen, Lacy and Stapp. The originals of the January 29, 1988 Payment Guaranties were returned to the defendants in exchange for their execution of the October 18, 1988 Payment Guaranties.

Currently, the FDIC has in its possession an original of the January 29, 1988 Payment Guaranty executed by Lacy.⁴ The FDIC does not have possession of any originals of the January 29, 1988 Payment Guaranties for defendants Cohen or Stapp. Defendant Stapp does have in his possession an original of the January 29, 1988 Payment Guaranty executed by him. Defendants Cohen and Levy have not been able to locate any originals of the January 29, 1988 Payment Guaranties in their possession.

At the time the FDIC was appointed receiver for College Boulevard, College Boulevard did not have in its possession any originals or copies of the October 18, 1988 Payment Guaranties in its files physically located at the bank. However, contained in the files of Kent Perry, attorney for College Boulevard for the Cohen-Esrey loan and the October 18, 1988 modifications thereof, were executed copies of the October 18, 1988 Payment Guaranties for each of the guarantors. These copies of the October 18, 1988 Payment Guaranties were kept in Mr. Perry's files pursuant to his regular course of business. At some point, the originals of the October 18, 1988 Payment Guaranties were delivered to College Boulevard and/or its agent. It would have been Mr. Perry's normal practice to receive the original Payment Guaranties at the loan closing, make a copy of each of the Payment Guaranties, place the copies in his file, and forward the original Payment Guaranties to College Boulevard.

Plaintiff does not have in its possession any originals of the October 18, 1988 Payment Guaranties. Plaintiff does have executed copies of the October 18, 1988 Payment Guaranties in its...