Standard Title Insurance Co. v. Roberts

• Decision Date: 17 August 1965
• Docket Number: No. 17845.,17845.
• Citation: 349 F.2d 613
• Parties: STANDARD TITLE INSURANCE COMPANY, a corporation, Appellant, v. Donald F. ROBERTS, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

349 F.2d 613 (1965)

STANDARD TITLE INSURANCE COMPANY, a corporation, Appellant, v.Donald F. ROBERTS, Appellee.

No. 17845.

United States Court of Appeals Eighth Circuit.

August 17, 1965.

Donald W. Giffin, of Spencer, Fane, Britt & Browne, Kansas City, Mo., made argument for appellant and filed brief with Joseph J. Kelly, Jr., of Spencer, Fane, Britt & Browne, Kansas City, Mo., and C. Wayne Litchfield, of Savage, Gibson, Benefield & Shelton, Oklahoma City, Okl.

Donald G. Stubbs, of McKenzie, Williams, Merrick, Beamer & Stubbs, Kansas City, Mo., made argument for appellee and filed brief.

Before VOGEL and BLACKMUN, Circuit Judges, and REGISTER, District Judge.

REGISTER, District Judge.

This is a suit on a written guaranty of a corporate note, such note being executed by the appellee, individually, at a time when he was the president and sole stockholder of the corporate debtor.Trial was had before The Honorable Richard M. Duncan, sitting without a jury.

Plaintiff in the original complaint was Patrons Cooperative Bank, the named obligee in the written guaranty.Subsequently, an amended complaint was filed, in which the appellant, Standard Title Insurance Company, was added as a partyplaintiff.After all the evidence was received at the trial, the original plaintiff was dismissed upon the basis that it was not a real party in interest.Appellee filed an answer to the amended complaint after which appellant filed a reply thereto, alleging in substance that appellee was estopped from relying on certain pleaded defenses by reason of conduct allegedly constituting fraud.Following the issuance of the trial court's memorandum opinion, findings of fact and conclusions of law, judgment was entered in favor of appellee on June 3, 1964.Thereafter the trial court overruled appellant's after judgment motions, and appeal to this court followed.

The facts necessary and relevant to a lucid understanding of the issues presented by this appeal are correctly and adequately stated by the trial court in its comprehensive Memorandum Opinion, Findings of Fact and Conclusions of Law (unreported), as follows:

"Patrons Cooperative Bank, a corporation, duly organized under the laws of the State of Kansas, with its banking house in the City of Olathe, in the State of Kansas, instituted this suit in this court on July 26, 1961, against the Investment Corporation of Missouri, a corporation, and Charles I. Hayes, Donald F. Roberts and Richard E. Kerns, all residents and citizens of the State of Missouri, to recover the sum of $26,570.14, together with interest from October 29, 1960, which amount was the balance due on a promissory note executed by the defendantInvestment Corporation of Missouri, and upon the written agreement of the defendants Hayes, Roberts and Kerns personally guaranteeing the payment of the note.

"The material facts as to the various transactions from which the controversy arose, are not in serious dispute.

"During the year 1960, the defendant Roberts and his associates were engaged in the development of subdivisions and the erection of houses therein in and around Kansas City, operating through numerous corporations which were controlled by the defendant Roberts; the other two defendants were officers of the corporations, but they controlled no stock.

"On February 1, 1960, Lubben & Sauer Builders, Inc., entered into a contract to sell to `Donald F. Roberts(or his assignee)\', Lots 1 to 16 inclusive East Fox Woods, a subdivision in Kansas City, Clay County, Missouri, for the agreed price of $40,000.00; $20,000.00 was to be paid upon the signing of the contract, and $8,000.00 on the delivery of the deed and the execution of a promissory note in the sum of $30,000.00 for the balance.

"Thereafter, Lubben & Sauer executed its deed to The Woodridge Corporation to such lots, and on May 25, 1960, the Woodridge Corporation through its president, Donald F. Roberts, executed its promissory note to Lubben & Sauer Builders, Inc., in the sum of $30,000.00, due not later than June 1, 1961, secured by deed of trust signed by the said The Woodridge Corporation, on all of the lots described aforesaid.This deed of trust was duly recorded in the office of the Recorder of Deeds in and for Clay County, Missouri.

"During the Summer of 1960, Charles I. Hayes, contacted Mr. Osborn, an officer of the Patrons Cooperative Bank, exploring the `possibility of establishing a line of credit for warehousing construction loans at his bank\', to the Investment Corporation.The amount sought was $100,000.00.Numerous conferences were held between Osborn and Hayes with respect not only to the amount sought to be borrowed, but also as to the security to be provided for the payment of the note.

"One of the obstacles to making the loan of $100,000.00 was that the deposits of the Bank were not sufficient to enable it under the laws of Kansas, to lend that amount of money to one borrower.To overcome this obstacle, Roberts obtained a certificate of deposit from B. C. Morton & Company of Boston, in the sum of $200,000.00 which he caused to be deposited in the Patrons Cooperative Bank, thus making it eligible under the law, to make the loan, and the bank agreed, upon providing certain securities, to make the loan.

"All of the negotiations were conducted by Hayes but he kept Roberts advised as to the progress of the transaction, and as to the terms thereof.

"In anticipation of its use as collateral, The Woodridge Corporation did on September 16, 1960, execute eight promissory notes to the Investment Corporation, six of them in the sum of $12,900.00 and two in the sum of $12,500.00, aggregating $102,400.00, and simultaneously therewith, executed deeds of trust on eight of the lots above described.These deeds of trust did not recite the prior deed of trust executed by The Woodridge Corporation to Lubben & Sauer Builders, Inc.All of these deals were duly recorded in the office of the Recorder of Deeds of Clay County, Missouri.

"In negotiations between Hayes and the Bank, it was agreed that title insurance would be obtained on the lots described in the deeds of trust from The Woodridge Corporation to the Investment Corporation, and that said deeds of trust and the title insurance policies would be assigned to the Bank as collateral for the loan.These title policies would guarantee that houses would be built on the lots, and that they would be free from mechanics liens.

"As additional security, it was also agreed that Roberts, Kerns and Hayes would execute their personal guarantee for the payment of the note.1

"1.`GUARANTY OF CORPORATION INDEBTEDNESS

For good and valuable consideration, the receipt whereof is hereby acknowledged, the undersigned stockholders and officers of the INVESTMENT CORPORATION OF MISSOURI, a corporation, do hereby guarantee the prompt payment when due of all indebtedness now owing by said corporation to the Patrons Co-Operative Bank of Olathe, Kansas, as evidenced by said corporation\'s note or notes including any renewal or extension thereof, and we do further guarantee payment when due of any future indebtedness which may hereafter be incurred by said corporation with said bank and hereby acknowledge that we are and shall be personally liable therefor.

This personal guarantee for payment of said corporation\'s indebtedness to said bank, shall remain in force until revoked by the undersigned in writing, it being agreed, that any such revocation shall not effect the personal liability of the undersigned for such corporation\'s indebtedness which may be owing at the time of such revocation or any renewal or extension thereof.

Dated this 26th day of September, 1960

/s/ Donald F. Roberts/s/ Charles I. Hayes/s/ Richard E. Kern Officers and stockholders of the above designated corporations'

"In pursuance of this arrangement, on September 27, 1960, the Investment Corporation by Roberts, its president, and Kerns, its secretary, executed a promissory note in the sum of $102,400.00 to the Bank, due six months after date.The note recited that it was secured by deeds of trust on Lots X-X-X-X-XX-XX-XX and 14 in East Fox Woods Addition.It did not recite the personal guarantee.The deeds of trust were duly assigned to the Bank and $100,000.00 was placed to the credit of the Investment Corporation of Missouri.

"Hayes says in his deposition, and there is no denial of it, that at the time the note was signed and delivered to the Bank, he obtained from it the form of written guarantee which he returned to Kansas City, Missouri, for signature by the parties, and that after it had been signed, he either delivered it personally to the Bank, or mailed it from Kansas City.He is not positive by what method it was returned to the Bank.

"At the time the loan was made, it was verbally understood that the proceeds of the loan would be used only in payment of construction costs of houses to be erected on the lots described in the deed of trust.The Plaintiff, Standard Title Insurance Company had knowledge of this arrangement, but there is no evidence as to whether or not Roberts had such knowledge.However, owing to the fact that he had been kept advised by Hayes as to all other details of the loan, it may reasonably be assumed that he knew about this arrangement.

"The title insurance policies were written by Standard Title Insurance Company through its wholly owned subsidiary, The Platte County Title Corporation.Dan Hayes(no relation to Charles I. Hayes) was the agent for the Title Insurance Company.

"A few days after the crediting of the amount of the loan to the account of Investment Corporation of Missouri, the said Investment Corporation through Roberts, withdrew $25,000.00 and deposited it in the account of The Woodridge Corporation.

"Later investigation revealed that no part of this money had been used to pay construction costs.Roberts was an extensive operator and had other interests in other corporations.It is not clear from the

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