U.S. v. Kyte, 82-2051
| Citation | 705 F.2d 967 |
| Decision Date | 25 February 1983 |
| Docket Number | No. 82-2051,82-2051 |
| Parties | UNITED STATES of America, Appellee, v. William J. KYTE, Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
Robert G. Ulrich, U.S. Atty., Larry D. Coleman, Asst. U.S. Atty., Kansas City, Mo., for appellee.
Robert W. Brown, Dale H. Sizemore, Jr., Hoskins, King, McGannon, Hahn & Hurwitz, Kansas City, Mo., for appellant.
Before BRIGHT, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and McMILLIAN, Circuit Judge.
Appellant William J. Kyte appeals from an order of the district court 1 granting the motion of the United States for summary judgment. We affirm.
On August 16, 1973, the Off Broadway Dinner Playhouse, Inc., borrowed $200,000 from Columbia Union National Bank and Trust Company of Kansas City, Missouri (now Centerre Bank) and executed a promissory note. Appellant was one of thirteen shareholders in Off Broadway. The United States Small Business Administration (SBA) guaranteed to repay ninety percent of the principal and interest on the loan in the event that Off Broadway defaulted. To further induce the bank to make the loan, each of the shareholders signed an SBA Standard Form Guaranty Agreement secured by his Off Broadway stock. The guaranty agreement signed by appellant and his wife provided in pertinent part:
[T]he undersigned hereby unconditionally guarantees to Bank, its successors and assigns and to the Small Business Administration (SBA) as its interests may appear, the due and punctual payment when due ... with respect to the note of the Debtor [Off Broadway] .... The term "collateral" as used herein shall mean any ... guaranties ....
... The undersigned hereby grants to Bank full power, in its uncontrolled discretion and without notice to the undersigned ... to deal in any manner with the Liabilities and the collateral, including but without limiting the generality of the foregoing, the following powers:
....
(d) To consent to the substitution, exchange, or release of all or any part of the collateral, whether or not the collateral, if any, received by Bank upon any such substitution, exchange, or release shall be of the same or of a different character or value than the collateral surrendered by Bank;
....
The obligations of the undersigned hereunder shall not be released, discharged or in any way affected, nor shall the undersigned have any rights or recourse against Bank, by reason of any action Bank may take or omit to take under the foregoing powers.
....
This guaranty is limited to $40,000.
The $40,000 figure was arrived at on the basis of $2.00 of guaranty per share of Off Broadway stock to be distributed to appellant. This arrangement was set forth in Off Broadway's application to the SBA to obtain the SBA guaranty. Although Off Broadway had issued only 1,000 of its 100,000 shares of stock at the time appellant executed his guaranty agreement, the SBA application indicated that he would eventually receive 20,000 shares. The other shareholders' guaranty agreements were similarly limited and together with appellant's guaranty totaled $200,000.
The day after appellant signed the guaranty agreement, Off Broadway prepared a stock certificate in his name for 20,000 shares. On September 15, 1973, this stock certificate was canceled because it was issued in error. Appellant received a new certificate for 10,000 shares. Other shareholders' holdings were concomitantly adjusted. On October 11, 1973, appellant's stock ownership was reduced to 9,999 shares in order to give the three major stockholders a majority of the outstanding stock. The reverse side of appellant's guaranty agreement form listed as collateral securing the guaranty the 9,999 shares finally issued on October 11, 1973 rather than the 20,000 shares issued the day after the guaranty agreement was signed. None of the guaranty agreements were modified to reflect final stock ownership and preserve the two-to-one ratio of guaranty to stock contemplated in the SBA loan application.
When Off Broadway defaulted, the United States demanded payment from appellant on his $40,000 guaranty. 2 Appellant failed to pay and the government instituted this action to recover the indebtedness. Appellant alleged that when the parties entered into the guaranty agreement, they were laboring under a mutual mistake, thus rendering the agreement either void or subject to reformation. The mutual mistake, according...
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