RAYTHEON AIRCRAFT CRED. CORP. v. PAL AIR INTERN.

• Decision Date: 17 April 1996
• Docket Number: No. 95-1437-JTM.,95-1437-JTM.
• Citation: 923 F. Supp. 1408
• Parties: RAYTHEON AIRCRAFT CREDIT CORPORATION, Plaintiff, v. PAL AIR INTERNATIONAL, INC.; Pace Aviation, Ltd.; Robert G. Bendall; and Ontario Express, Ltd., Defendants and Third Party Plaintiffs, v. James A. PORTER and Samoa Aviation, Inc., Third Party Defendants.
• Court: U.S. District Court — District of Kansas

923 F. Supp. 1408

RAYTHEON AIRCRAFT CREDIT CORPORATION, Plaintiff, v. PAL AIR INTERNATIONAL, INC.; Pace Aviation, Ltd.; Robert G. Bendall; and Ontario Express, Ltd., Defendants and Third Party Plaintiffs, v. James A. PORTER and Samoa Aviation, Inc., Third Party Defendants.

No. 95-1437-JTM.

United States District Court, D. Kansas.

April 17, 1996.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Jeff. C. Spahn, Jr., and Roger E. McClellan, of Martin, Pringle, Oliver, Wallace & Swartz, Wichita, KS, for plaintiff.

Edward A. McConwell, of McConwell Law Offices, Overland Park, KS, for Pal Air International, Pace Aviation and Robert Bendall.

Kenneth P. Leyba, of Curfman, Harris, Rose, Weltz, Metzger & Smith, Wichita, KS, for Ontario Express.

Robert A. Dennison, III, Austin, TX; and Scott J. Gunderson, of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, KS, for James A. Porter and Samoa Aviation.

MEMORANDUM AND ORDER

MARTEN, District Judge.

In the present action, plaintiff Raytheon Aircraft Credit Corporation, successor to Beech Acceptance Corporation, seeks to recover on a promissory note executed by defendant Pal Air Aviation, Inc. of Nevada. The September 5, 1990 note in the amount of $1 million was executed to finance Pal Air's purchase of two Beechcraft King Air airplanes. As security for the note, Raytheon retained a security interest in the airplanes. Raytheon contends defendant Pal Air defaulted in its required payments under the promissory note, and Raytheon seeks recovery against Pal Air and two guarantors of the note, Pal Air's sister company, Pace Aviation Limited, and Robert Bendall, the sole shareholder and officer of both Pal Air and Pace. Bendall currently resides in Nevada.

In its first amended complaint filed December 6, 1995, Raytheon added Ontario Express, Ltd. as a defendant. Ontario Express allegedly executed a $125,000.00 guarantee of the promissory note. Raytheon seeks judgments against Ontario Express in the amount of $125,000.00 and against the remaining Nevada defendants in the amount of $615,915.58.

On November 20, the Nevada defendants filed a cross-claim against Samoa Aviation, Inc. and its president, James Porter. Samoa Aviation is organized and doing business under the laws of the Territory of American Samoa, and Porter is domiciled in American Samoa. The Nevada defendants contend that in 1990 Porter asked Bendall to acquire two King Air aircraft currently located in Canada, with financing from Beechcraft, and to have them recertified for United States registration.

There are currently three motions to dismiss before the court, one by Ontario Express and two by the Samoan cross-claiming defendants. Ontario Express seeks dismissal because it contends Raytheon and Pal Air improperly modified the underlying obligation without its consent. The Samoan defendants have two motions before the court. The first contends the action against them should be dismissed since they were brought into the action as cross-claimants, rather than as the result of a third party action. Their second motion seeks dismissal on the grounds of (1) lack of jurisdiction, (2) inconvenient forum, (3) failure of the Nevada parties to raise similar arguments as counterclaims in the Samoan litigation, (4) improper removal, (5) prematurity, and (6) abstention. The court has received and reviewed all submissions by the parties, including the plaintiff's supplemental memorandum of March 28, 1996. On April 1, 1996, the court heard oral argument relating to the various dispositive motions pending before the court. For the reasons stated herein, these motions will be denied.

The present action revolves around two agreements executed on September 5, 1990. In the first, Pal Air and Samoa Aviation entered into an aircraft lease agreement for one of these aircraft (N710AS S/N 197). The lease agreement was signed by Bendall and Porter as presidents of the lessor and lessee. The lease agreement provided that "any dispute shall be ligated sic in the courts of the State of Nevada." (Defs.' Memo., Ex. 1 at ¶ 23.)

On the same date, Pal Air completed a Beech Acceptance Corporation promissory note in the amount of $1 million. The note is secured by a security interest in two Beechcraft A-100 airplanes, Serial Nos. N712AS and N710AS. The note is guaranteed by Bendall, Pace, and Samoa Aviation. Paragraph 13 of the note provides that "ANY LEGAL PROCEEDING BASED UPON THE PROVISIONS OF THIS AGREEMENT SHALL BE BROUGHT EXCLUSIVELY" in a state or federal court located in Wichita, Kansas. (Defs.' Memo., Ex. 2.) Bendall, Pal Air and Pace contend Pal Air refused to accept delivery of the other aircraft (N712AS S/N 198), and as a result they have been subjected to the deficiency action by Raytheon/Beechcraft on the $1 million promissory note.

On April 28, 1995, Samoa Aviation kicked off the geographically dispersed litigation arising from the airplane lease agreement by commencing an action in the High Court of American Samoa (Trial Division) against Bendall, Pal Air and Pace, seeking a determination of the parties' rights to two DeHavilland Twin Otter aircraft and one Beechcraft King Air aircraft. Samoa Aviation v. Bendall, Case No. 50-95. On June 13, 1995, the Samoan court granted a preliminary injunction in favor of the plaintiff, restraining Bendall, Pal Air, or Pace from selling, encumbering, or taking possession of the aircraft. The court also appointed a trustee, who has taken custody of title to the aircraft.

Bendall, Pal Air and Pace filed their answer in the Samoan action on June 30, 1995. Shortly afterwards, on July 14, Pal Air sued Samoa Aviation, along with James Porter and his wife Constance, in Samoa. Pal Air Internat'l v. Porter, Case No. 70-95. The Samoan court later consolidated this case with the previous injunction action, Case No. 50-95.

On November 12, 1995, Bendall, Pal Air and Pace sued Samoa Aviation, James Porter and Constance Porter in the United States District Court for the District of Nevada, Pal Air Internat'l v. Samoa Aviation, Case No. CV-N-95-00679-HDM.

1. Motion to Dismiss of Ontario Express

The motion to dismiss of defendant Ontario Express is premised on the general rule under Kansas law limiting a guarantor's liability when there has been a material change in the underlying obligation without the guarantor's consent. First National Bank of Anthony v. Dunning, 18 Kan.App.2d 518, 520, 855 P.2d 493 (1993). In the present case, Beechcraft, Raytheon's predecessor, entered into agreements with Pal Air on October 12, 1992 and September 29, 1994, extending the time for Pal Air to meet its obligations on the promissory note.

The court finds the motion to dismiss should be denied. The general rule cited by Ontario Express does not apply where the guarantee agreement itself permits modification of the underlying obligation. Hill Petroleum v. Pathmark Internat'l, 759 F.Supp 722, 725 (D.Kan.1991). In the present case, ¶ 3.10 of the guarantee agreement does provide that Ontario Express will be liable on the note "as the same may be amended, modified or supplemented with the consent" of Ontario Express and Beech Acceptance. But the agreement, read as a whole, does not establish that failure to obtain written consent nullifies the guarantee. (Plaintiff's First Amended Complaint, Ex. D.)

This is because other language in the agreement indicates that Ontario Express agreed to waive any defense based on independent amendment of the agreement. Thus, Ontario explicitly waives "any and all defenses available to guarantors, sureties, and other secondary parties at law or in equity." ¶ 2(e). More importantly, the agreement expressly provides that the liability of Ontario Express will continue "irrespective of ... any deferral of payment." ¶ 2(c)(v). The Court finds that the guarantee obligation was intended to survive modification, and the motion to dismiss must be denied.

Moreover, there is some evidence that Ontario Express in any event did consent to the time extensions, as reflected in a letter of October 23, 1992 from Canadian Regional Airlines (the owner of Ontario Express) to Bendall. (Pltf.'s Resp., Ex. A.) Ontario Express responds by contending that with regard to motions to dismiss under Rule 12(b)(6), the court is prevented from considering matters beyond the pleadings, and cites the statement in Adams v. Walker, 767 F.Supp. 1099, 1103 (D.Kan.1991) (citing Hal Roach Studios v. Richard Feiner & Co., 883 F.2d 1429, 1441 n. 18 (9th Cir.), amended and superseded, 896 F.2d 1542 (9th Cir. 1989)), that the court in resolving such a motion should not consider evidence "beyond the pleadings unless it is submitted or attached as part of the complaint."

Ontario Express misreads the law. Decisions such as Adams and Hal Roach properly provide that a court should not consider matters beyond the pleadings as a basis for granting a dispositive motion under Rule 12(b)(6). The party opposing the motion is not so limited, and the motion should be granted "only if it appears beyond a reasonable doubt that a plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Adams, 767 F.Supp. at 1103 (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957)). Here, it cannot be said beyond a reasonable doubt that Raytheon will not be able to prove Ontario Express consented to the extensions. Accordingly, the motion to dismiss will be denied.

2. Improper Action

The Samoan parties seek dismissal because the action which brought them into the case is denominated as a "cross-claim," although they were not previously parties to the action. Rule 13(g) provides for a cross-claim "by one party against a co-party." Bendall, Pal Air and Pace essentially concede that the action against the Samoan parties is misnamed.

The court has been unable to find any authority, however, to conclude the necessary sanction for misnaming the action against an additional party is...