United Fasteners, Inc. v. First State Bank of Crossett, 85-8

Decision Date10 June 1985
Docket NumberNo. 85-8,85-8
Citation691 S.W.2d 126,286 Ark. 202
Parties, 41 UCC Rep.Serv. 139 UNITED FASTENERS, INC. et al., Appellants, v. FIRST STATE BANK OF CROSSETT, Appellee.
CourtArkansas Supreme Court

Johnson & Harrod, Hamburg, for appellants.

Griffin, Rainwater & Draper, Crossett, for appellee.

HICKMAN, Justice.

The First State Bank of Crossett had been doing business with United Fasteners, Inc., for some time, and on June 15, 1979, a $56,500 promissory note was issued to consolidate prior loans. The note was secured by second mortgages on the residences of the principal parties to the corporation and their wives: Robert and Joyce Carter, Buddy and Lennie Stephens, and Michael and Wanda Jenkins. It was a corporate note executed on the front by all the principals and on the reverse side of the note were three signature lines for the corporation principals and sole shareholders to sign individually. Robert Carter and Michael Jenkins signed the back side of the note but Buddy Stephens did not.

About a year later, in August of 1980, the bank loaned the corporation $17,000. The appellant corporation, United Fasteners, was the maker of the note, and it was signed by Buddy Stephens and Michael Jenkins, who were the sole shareholders and officers of the corporation at that time. This note was secured by accounts receivable, inventory, furniture, and fixtures of the corporation. This security interest was evidenced by a financing statement and security agreement.

The appellant corporation defaulted on both notes, and the bank took possession of the collateral and proceeded to dispose of and liquidate it. The bank brought an action to foreclose on the mortgages which secured the first note and the security interest for the second note. Both notes were found valid and in default, and the indorsers were found jointly and severally liable. The chancellor ordered the sale of the mortgaged realty to satisfy the first note. The Carters and Lennie Stephens attempted to challenge the foreclosure of the collateral securing the second note on the basis that they had not received reasonable notification of the time and place of the sale or disposition of the collateral under both the Commercial Code and our cases.

The main issue is whether appellants Robert Carter and his wife, Joyce, and Lennie Stephens have standing to raise certain defenses under Ark.Stat.Ann. § 85-9-504(3) (Supp.1983) in a foreclosure action instituted by the First State Bank of Crossett, Arkansas, on the promissory note issued by United Fasteners, Inc., on August 18, 1980. The trial court held that the Carters and Lennie Stephens did not have standing to raise these defenses. We affirm.

The Carters and Lennie Stephens were not debtors or parties on the second note. Their signatures did not appear on it. The corporation was the debtor. The loan was made to the corporation, the proceeds of the loan accrued to the corporation, and the principals of the corporation at that time, Michael Jenkins and Buddy Stephens, signed the note. Since the Carters and Lennie Stephens were not parties or debtors to the second note, they were not entitled to notice prior to disposition of the collateral. 1 Ark.Stat.Ann. § 85-9-504(3).

The appellants attempt to get around these facts by arguing that the language of the security agreement executed with the second note incorporates both notes and gives them standing to raise defenses as to the second note. The clause they rely upon concerns the application of the proceeds received from the sale of the collateral; but that language clearly refers to...

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4 cases
  • In re Ace Sports Management, LLC.
    • United States
    • U.S. Bankruptcy Court — Eastern District of Arkansas
    • November 28, 2001
    ...to designate his office in the corporation remains personally liable on the note. Those cases are United Fasteners, Inc. v. First State Bank of Crossett, 286 Ark. 202, 691 S.W.2d 126 (1985) and Fanning v. Hembree Oil Co., 245 Ark. 825, 828-29, 434 S.W.2d 822, 824 However, these cases do not......
  • Mollenhour v. State First Nat. Bank of Texarkana, CA
    • United States
    • Arkansas Court of Appeals
    • April 19, 1989
    ...finding that the appellant signed his name to both notes in corporate and individual capacities. See United Fasteners, Inc. v. First State Bank, 286 Ark. 202, 691 S.W.2d 126 (1985). First, it is clear from the evidence presented that the bank would not loan the money to Arkansas Parts and E......
  • Billingsley v. Smith
    • United States
    • Arkansas Court of Appeals
    • February 18, 2004
    ...cite cases under prior law in support of their position that appellee is liable for the obligation. See United Fasteners, Inc. v. First State Bank, 286 Ark. 202, 691 S.W.2d 126 (1985); Fanning v. Hembree Oil Co., 245 Ark. 825, 434 S.W.2d 822 (1968); Mollenhour v. State First Nat'l Bank, 27 ......
  • Cleveland Chemical Co. of Arkansas, Inc. v. Keller, CA
    • United States
    • Arkansas Court of Appeals
    • September 24, 1986
    ...to avoid personal liability on the part of such officer. A similar holding was reached in United Fasteners, Inc. v. First State Bank of Crossett, 286 Ark. 202, 691 S.W.2d 126 (1985), where the Supreme Court held that a signature is only in a representative capacity if the name of the organi......

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