Stewart Title Guar. Co. v. WKC Restaurants Venture Co.

• Decision Date: 27 January 1998
• Docket Number: No. WD,WD
• Citation: 961 S.W.2d 874
• Parties: STEWART TITLE GUARANTY COMPANY, Respondent, v. WKC RESTAURANTS VENTURE CO., et al., Appellants. 53511.
• Court: Missouri Court of Appeals

Page 874

961 S.W.2d 874

STEWART TITLE GUARANTY COMPANY, Respondent, v. WKC RESTAURANTS VENTURE CO., et al., Appellants.

No. WD 53511.

Missouri Court of Appeals,

Western District.

Jan. 27, 1998.

Motion for Rehearing and/or Transfer to

Supreme Court Denied March 31, 1998.

As Modified March 31, 1998.

Bruce Keplinger, Overland Park, Norris, Keplinger & Logan for appellants.

Dale L. Beckerman, Deacy & Deacy, Kansas City, for respondent.

Before LAURA DENVIR STITH, P.J., and BRECKENRIDGE and HANNA, JJ.

BRECKENRIDGE, Judge.

Allen J. Block, David M. Block, co-trustee of David M. Block Trust, Jay Friedman, James E. Grier, William Logan, Hal M. Danzig, and C. Maxwell Logan ¹ appeal the trial court's order entering partial summary judgment in favor of Stewart Title Guaranty Company (Stewart Title) on Stewart Title's action to enforce a guaranty. The guarantors argue that genuine issues of material fact exist regarding (1) whether the guaranty was executed contemporaneously with the note; (2) the amount of damages the guarantors owe; (3) whether the foreclosure on the collateral by a third party constituted a material alteration of the principal contract; (4) whether the guarantors are accommodation parties and entitled to set-off; (5) whether the note is non-recourse and the guaranty should not be broader; and (6) whether provisions of the guaranty violated the Equal Credit Opportunity Act (ECOA). The guarantors also appeal the trial court's order overruling their motion for leave to file an amended answer to Stewart Title's petition to include the following two affirmative defenses: (1) the guarantors are entitled to a set-off because they relied on Stewart Title's negligent misrepresentation that the mortgage they were guaranteeing was a first mortgage; and (2) the guarantors are entitled to a set-off because they are accommodation parties, and Stewart Title is not a holder in due course. Because this court finds that there is no genuine issue of material fact that the guarantors executed a valid and enforceable guaranty, and none of the guarantors' pleaded or proposed affirmative defenses would have prevented Stewart Title from recovering on the guaranty, the judgment of the trial court is affirmed.

On appeal from an order granting summary judgment, this court reviews the record in the light most favorable to the party against whom judgment was entered. ITT Commercial Finance v. Mid-Am. Marine, 854 S.W.2d 371, 376 (Mo. banc 1993). The facts, in the light most favorable to the guarantors, are that WKC Restaurants Venture Company (WKC) was a general partnership. Two of the partners in WKC were the WRVC Investment Company (WRVC), and Restaurant Land Partnership, both general partnerships. Allen J. Block, David M. Block, co-trustee of David M. Block Trust, Jay Friedman, James E. Grier, and W.H. of K.C., Inc., a Kansas corporation, were partners in the WRVC partnership. William Logan, Hal M. Danzig, and C. Maxwell Logan were partners in Restaurant Land Partnership.

On September 29, 1986, WKC executed a promissory note in the principal amount of $720,000 in favor of Home Savings Association of Kansas City, F.A, to refinance an earlier loan from Home Savings in the same amount. The collateral for the loan was a deed of trust on WKC's Wendy's restaurant located at 31st and Main in Kansas City, Missouri, a collateral assignment of leases and rents affecting the property, and a security agreement affecting the property. There was also a guaranty, dated that same day, executed by Leon Karosen and his wife, Mary Karosen, James H. Block and his wife, Rae Alene Block, Allen J. Block and his wife, Gloria Block, David M. Block, co-trustee of David M. Block Trust, Jay Friedman, James E. Grier and his wife, Virginia Grier, William Logan and his wife, Judith R. Logan, Hal M. Danzig and his wife, Carolyn Danzig, C. Maxwell Logan and his wife, Heidi E. Logan, guaranteeing the payment of "all principal, interest, and all other charges due" under the promissory note. Each of the guarantors agreed to be liable under the guaranty in an amount equal to, but not exceeding, a portion of the $720,000 equal to 133% of the guarantor's interest in the WKC Restaurants Venture Company partnership. Stewart Title was the title insurance company on the refinancing transaction, and it issued a lender's title policy to Home Savings in the amount of $720,000. The title policy showed Home Savings as the first mortgage holder on the property. The loan transaction closed on November 26, 1986.

In 1992, Home Savings became insolvent. The Resolution Trust Corporation (RTC), as receiver of Home Savings, assigned the WKC note to Chemical Bank, N.A. WKC made monthly payments on the promissory note from November of 1986 up to and including April of 1993. However, on July 9, 1993, the trustee for industrial revenue bonds issued on a parcel of land that included the collateral for the loan foreclosed on the property. The Wendy's restaurant was sold at a foreclosure sale to Security Bank of Kansas City, as trustee for the Land Clearance for Redevelopment Authority of Kansas City, Missouri Revenue Bonds. Home Savings did not hold a first mortgage as Stewart Title had erroneously represented in the lender's title policy Stewart Title issued in its capacity as title insurer. Chemical Bank presented a claim for $720,000 to Stewart Title under the title policy. On September 19, 1994, Stewart Title paid the claim, and in return, Chemical Bank assigned the WKC note to Stewart Title.

In October of 1994, Stewart Title, as the note holder, filed a petition against WKC, WRVC, Restaurant Land Partnership, and all of the partners in those partnerships, as makers of the note, seeking payment of the balance due on the note, plus interest, late charges, attorney's fees, and court costs. The remaining ten counts were against the guarantors of the note, and sought each guarantor's portion, pursuant to the formula in the guaranty, of the balance due under the note, plus interest, late charges, Stewart Title's attorney's fees, and costs. In their answer filed in May of 1995, the guarantors asserted the following five affirmative defenses: (1) Stewart Title's petition failed to state a claim upon which relief could be granted; (2) Stewart Title failed to mitigate its damages; (3) if the guarantors were liable, their liability was released and discharged because Stewart Title failed to pursue persons or entities that were or may have been jointly and severally liable; (4) the guaranty was void because it was made in violation of the Equal Credit Opportunity Act; and (5) Stewart Title was barred from recovering against the guarantors because the makers of the note have no personal liability, and the obligations of any guarantors cannot exceed the obligations of the makers.

Stewart Title moved for partial summary judgment against the guarantors for their respective portions of the unpaid principal balance of the note, interest, late fees, and attorney's fees. The guarantors then filed a motion for leave to file an amended answer. The proposed amended answer added two affirmative defenses, namely, that the guarantors were entitled to set-off because they relied on Stewart Title's negligent misrepresentation that the mortgage they were guaranteeing was a first mortgage, and that the guarantors were entitled to a set-off because they were accommodation parties, and Stewart Title was not a holder in due course. The guarantors also moved for summary judgment, based upon their contention that there was a material alteration of the underlying contract that, as a matter of law, discharged them from their obligation under the guaranty. The guarantors' defenses were based on the premise that the guarantors did not know the priority of liens on the Wendy's property the guarantors owned through their partnerships, and that they relied on Stewart Title's misstatement that the Home Savings mortgage was a first lien.

On July 8, 1996, the trial court entered an order overruling the guarantors' motion for leave to file an amended answer and the guarantors' motion for summary judgment. The trial court sustained Stewart Title's motion for partial summary judgment, and ordered the guarantors to pay their respective portions of liability on the note based upon the formula in the guaranty. ² The court declined to order the guarantors to pay attorney's fees and costs in addition to their liability on the note, finding that Stewart Title's recovery against the guarantors was limited by the guaranty and did not include expenses of enforcement, costs and attorney's fees. Stewart Title did not appeal this ruling. In its order for partial summary judgment, the court found that there was no just reason for delay; thus, the partial summary judgment is a final and appealable order. See Rule 74.01(b).

Review of summary judgment is conducted in the same manner as review of a court-tried case, and the judgment will be sustained if any theory supports it. AG Processing v. South St. Joseph Sewer, 937 S.W.2d 319, 322 (Mo.App.1996). "The criteria on appeal for testing the propriety of summary judgment are no different from those which should be employed by the trial court to determine the propriety of sustaining the motion initially." ITT, 854 S.W.2d at 376. Here, Stewart Title was the movant. A movant must establish that there is no genuine dispute as to every material fact necessary to support the claim and a right to judgment as a matter of law. Id. at 381. Once the movant has made a prima facie showing, the non-movant may not rely upon "mere allegations or denials of his pleading," but must respond by affidavits, or as otherwise provided in Rule 74.04, and provide the court with specific facts demonstrating a genuine issue for trial. Id. Conclusory allegations are insufficient to defeat a motion for summary judgment. McDowell v. Waldron, 920 S.W.2d 555, 561 (Mo.App.1996). Additionally, because the...