U.S. v. Kukowski, 83-2214

• Decision Date: 31 May 1984
• Docket Number: No. 83-2214,83-2214
• Parties: 38 UCC Rep.Serv. 1009 UNITED STATES of America, Appellee, v. Francis KUKOWSKI, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1057

735 F.2d 1057

38 UCC Rep.Serv. 1009

UNITED STATES of America, Appellee, v. Francis KUKOWSKI, Appellant.

No. 83-2214.

United States Court of Appeals Eighth Circuit.

Submitted April 10, 1984.

Decided May 31, 1984.

R.E. Stefanson, Moorhead, Minn., for appellant.

Gary Annear, Fargo, N.D., for appellee.

Before ROSS, ARNOLD and FAGG, Circuit Judges.

FAGG, Circuit Judge.

The United States brought this action to collect from the guarantor of a promissory note the unpaid principal and interest due on the note. The district court granted the United States' motion for summary judgment and we affirm.

In March 1981 Roger W. Lende executed a $70,000 promissory note to the First Bank of North Dakota (N.A.)-Fargo in consideration of a loan to be used by Lende to purchase a local service station. The Small Business Administration participated in this loan and guaranteed to repay ninety percent of the indebtedness in the event that Lende defaulted. The loan was also secured by Lende's interest in the inventory, equipment and accounts receivable of the service station. In addition to the SBA guarantee on the loan, the bank requested that Lende obtain a guarantor. Francis Kukowski agreed to act as a guarantor on the loan, and he executed an SBA guaranty form to the bank. The nature of his liability on the guaranty was explained to him by bank officials. In June 1981 the bank loaned Lende an additional $25,000 which was not guaranteed by either the SBA or Kukowski. The SBA, however, subordinated its collateral interest in the previous loan to the $25,000 loan made by the bank.

Lende defaulted on the conditions of the promissory notes by failing to make payments. The bank sold the service station equipment to the highest bidder for $7,000, and collected $4,277.97 on the accounts receivable and applied these amounts to the balance due on the $25,000 loan. The bank failed to give notice of the sale to Kukowski. In November and December 1981 the $70,000 promissory note and Kukowski's guaranty were assigned by the bank to the SBA without recourse, and the balance of the equipment and accounts receivable neither sold nor collected was turned over to the SBA. The SBA then made demand upon Kukowski to pay the balance due on the note in accordance with the guaranty agreement between Kukowski and the bank. Kukowski failed to make payment on the note and the United States brought this action to enforce and collect on Kukowski's guaranty. The district court granted the United States' motion for summary judgment and Kukowski appeals.

On appeal, Kukowski argues that he was released from liability under the guaranty because (1) the bank failed to give him notice of the sale of collateral; and (2) the collateral securing the first loan was improperly applied to the second loan without Kukowski's consent. "It is of course fundamental that the starting point for analysis of the rights and duties of the parties to a guaranty agreement is the instrument itself." United States v. Kyte, 705 F.2d 967, 969 (8th Cir.1983), quoting United States v. Outriggers, Inc., 549 F.2d 337, 339 (5th Cir.1977). Under the express terms of the guaranty, Kukowski waived any right he might otherwise have had as a result of the failure of the bank to realize on the collateral. Kukowski's guaranty granted the bank "full power, in its uncontrolled discretion and without notice to [Kukowski] * * * to deal in any manner with * * * the collateral." (Emphasis added.) Under the guaranty, the bank had the power "to enter into any agreement of forbearance with respect to all or any part of the collateral," "[t]o consent to the * * * exchange, or release of all or any part of the collateral" and "to forbear from realizing [on the collateral], all as [the bank] in its uncontrolled discretion may deem proper." The guaranty also provides that Kukowski's obligations "shall not be released, discharged or in any way affected * * * by reason of any action" taken by the bank in conformity with the terms of the guaranty. Waivers of this nature have previously been held valid and binding as to guarantors. See First National Park Bank v. Johnson, 553 F.2d 599, 601-02 (9th Cir.1977); United States v. Proctor, 504 F.2d 954, 957 (5th Cir.1974); United States v. Flasher Company of Texas, 460 F.Supp. 231, 233 (S.D.Tex.1977).

Kukowski argues that as a guarantor, under the Uniform Commercial Code, he has the same nonwaivable right to notice of intended disposition of collateral as do the principal debtors. "[F]ederal law governs questions involving the rights of the United States arising under nationwide federal programs." United States v. Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448, 1457, 59 L.Ed.2d 711 (1979). See also Clearfield Trust Co. v. United States, 318 U.S. 363, 366-67, 63 S.Ct. 573, 574-75, 87 L.Ed. 838 (1943). However, whether federal law should adopt state law or fashion a nationwide federal rule depends upon a variety of considerations. United States v. Kimbell Foods, Inc., supra, 440 U.S. at 728, 99 S.Ct. at 1458. In this case, where the state law on which private creditors base their daily commercial transactions is derived from a uniform statute, there is little or no concern that...