United States v. Glover

• Decision Date: 19 December 1977
• Docket Number: No. CIV-75-0954-D.,CIV-75-0954-D.
• Citation: 453 F. Supp. 659
• Court: U.S. District Court — Western District of Oklahoma
• Parties: UNITED STATES of America, Plaintiff, v. Boyd GLOVER and Bonnie D. Glover, husband and wife, Margie L. Clark, as representative of or successor in interest for Herman L. Clark, Deceased, Les Carlson, Jr., and Vernon Embry, Defendants.

453 F. Supp. 659

UNITED STATES of America, Plaintiff, v. Boyd GLOVER and Bonnie D. Glover, husband and wife, Margie L. Clark, as representative of or successor in interest for Herman L. Clark, Deceased, Les Carlson, Jr., and Vernon Embry, Defendants.

No. CIV-75-0954-D.

United States District Court, W. D. Oklahoma.

December 19, 1977.

John E. Green, Acting U. S. Atty. by Givens L. Adams and Richard F. Campbell, III, Asst. U. S. Attys., Oklahoma City, Okl., for plaintiff.

William L. Dean, Oklahoma City, Okl., for defendants Glover.

Bruce M. Brill, Oklahoma City, Okl., for defendant Clark.

Jerome S. Sepkowitz, Oklahoma City, Okl., for defendants Carlson and Embry.

MEMORANDUM OPINION

DAUGHERTY, Chief Judge.

Following a non-jury trial in this action in which Plaintiff seeks judgment on certain guaranties, the Court makes the following findings of fact, conclusions of law and decisions herein:

On January 8, 1973 the Plaintiff through the Small Business Administration (SBA) lent the sum of $75,000 to Venus Electronics Corporation (Venus). In connection therewith Venus, through its President, the Defendant Boyd W. Glover (Glover), executed and delivered to SBA a promissory note, a security agreement covering certain property and a Small Business Administration Loan Agreement.

Defendant Glover and wife Bonnie D. Glover, and Defendant Herman L. Clark (Clark) and wife Margie L. Clark executed on January 8, 1973 an unconditional guaranty of personal liability on said loan. The guaranty was delivered to the SBA and guaranteed payment of the said debt owed by Venus.

Said note executed by Defendant Glover states that, "the indebtedness shall immediately become due and payable without notice or demand, upon . . . the reorganization (other than a reorganization pursuant to any of the provisions of the Bankruptcy Act of 1898, as amended) or merger or consolidation of the undersigned (or the making of any agreement therefor) without the prior written consent of Holder . ."

On June 20, 1973 a meeting of the stockholders of Venus took place at which an election of Directors was held and the composition of the majority of the Board was changed. At that time Defendant Glover owned approximately 38% of the shares of Venus. The Defendants Les Carlson, Jr., (Carlson), Vernon Embry (Embry) and Herman L. Clark among others were elected to the Board of Directors.

At a subsequent meeting an election of officers took place with Defendant Glover not being re-elected to the office of President. Defendant Glover thereafter refused to turn over the records or keys of Venus to the new officers. An injunction suit was then brought in State Court against Defendant Glover by Defendants Carlson and Embry and others. A meeting was then held attended by Defendants Glover, Clark, Embry, Carlson and others wherein a discussion of the sale of Defendant Glover's stock to Defendants Carlson, Embry and Clark was discussed.

An agreement was thereafter entered into on August 20, 1973 between Clark and Defendants Glover in which Defendants Glover agreed to sell their 261,250 shares of Venus stock to Defendant Clark or his assigns for $50,000. The agreement for the purchase by Clark or his assigns of the shares of Defendants Glover provided that, if required, the approval of the SBA be obtained regarding the sale, and also required that Defendants Glover be held harmless on the $75,000 loan owed to the SBA. On August 24, 1977 Defendant Glover wrote the SBA requesting his release from the guaranty of January 8, 1973. This request of Glover for release from the guaranty was denied by the SBA and Glover was so notified verbally and later in writing under date of September 10, 1973.

Defendants Glover demanded as a condition of their sale of 261,250 shares of Venus stock that Defendants Carlson and Embry execute a guaranty on the $75,000 loan for the purpose of reducing Defendants Glover's potential personal liability on said loan. Clark and wife were already guarantors. Defendants Carlson and Embry agreed to this and supplied their guaranty to SBA. The Defendants Glover would not have sold part of their stock to Carlson and Embry without Carlson and Embry executing their guaranty to SBA.

Defendant Glover told the SBA that Defendants Carlson and Embry, along with one John Stone who did not sign the guaranty, were agreeable to offering the SBA their personal guaranty of the said $75,000 loan in connection with his sale of some of his Venus stock to them. James R. Baker, SBA Loan Officer, filled out and mailed an SBA guaranty form to Venus as a result of this information from Defendant Glover. The SBA received back said guaranty dated September 10, 1973 which bore the signatures of Defendants Carlson and Embry. Stone did not sign the same. The SBA advised Defendant Glover that it had received such guaranty form.

Prior to the sale of the Glover stock, Jon Rice of the SBA had conversations with Defendants Carlson and Embry in which Rice stated to them that the signing of a guaranty by Defendants Carlson and Embry was required by the SBA in connection with their purchase of Glover stock. This conclusion by Jon Rice appears to have been predicated on the belief that the change in operating control and sale of 38% of the outstanding shares of Venus stock constituted a reorganization within the meaning of the loan papers and as such would allow the SBA to declare the indebtedness immediately due and payable. However, Rice testified that he did not mention to anyone that a reorganization of Venus was underway. He testified that he told Carlson and Embry that their guaranty was required. He based this advice he now says on a reorganization of Venus or perhaps on SBA policy. He further testified that Carlson and Embry did not request SBA to forbear from calling the note. Rice and James R. Baker, the other SBA witness, both testified that they did not know what they would have done regarding the Venus loan if Carlson and Embry obtained some of the Glover stock and would not furnish SBA their guaranty on the Venus loan, except Baker testified that he probably would have sought legal advice.

On September 6, 1973 Defendant Glover received $25,000 from Defendant Clark as payment for the sale of part of the 261,250 shares owned by Defendant Glover to Clark. On September 17, 1973 Defendant Glover was paid $12,500 by Defendant Carlson and $12,500 by Defendant Embry for the purchase by them of the remaining Glover shares. At this time Venus was not in default on its SBA note.

On or about September 20, 1974 Venus failed to make payment on its obligation to the SBA. On March 7, 1975 the SBA declared the debt of Venus to be delinquent and thereafter accelerated the note. Venus was agreeably liquidated by sale on June 26, 1975 which left a balance due on the note and under the guaranties in the amount of $28,290.60 as of July 25, 1977 and with daily interest accruing thereafter at the rate of $3.89.

From the evidence presented the Court finds that the foregoing are the facts of this case deemed pertinent to the controversy involved in this litigation in which Plaintiff seeks a judgment against all guarantors for the above balance.

Federal law applies herein. 15 U.S.C. 634; distinguish United States v. Yazell, 382 U.S. 341, 86 S.Ct. 500, 15 L.Ed.2d 404. The Court finds that this was not an SBA loan negotiated or hand tailored with reference to Oklahoma law. It was a routine nation wide act of SBA. See Knudson v. Weeks, 394 F.Supp. 963 (W.D. Okl.1975). Plaintiff established a prima facie case by introducing in evidence the note, security agreement, loan agreement, the two guaranties signed by the Defendants and the sworn transcript of account. United States v. Irby, 517 F.2d 1042 (Fifth Cir. 1975). By way of defense Defendants Carlson and Embry assert that said guaranty signed by them dated September 10, 1973 is not enforceable for lack of consideration; that lack of consideration is present because there was not a reorganization of Venus as contemplated by the SBA loan papers and otherwise the sale of the Glover stock to them did not require the prior approval of SBA.

Plaintiff agrees that Venus was not reorganized within the meaning of the SBA loan papers when Defendants Glover sold their stock. But Plaintiff asserts that the SBA at the time of the sale of the stock by Glover to Carlson and Embry honestly believed in good faith that there was a reorganization of Venus, told Defendants Carlson and Embry this and would have called the loan had it not received the guaranty of the new stockholders, Carlson and Embry, who succeeded to some of the stock of Defendants Glover; that Defendants Carlson and Embry knew the above and furnished a guaranty to avoid the calling of the loan; that in these circumstances a valid consideration existed for the Carlson and Embry guaranty. Plaintiff also claims the Carlson and Embry guaranty is supported by a valid consideration...