United States v. Krochmal

• Decision Date: 21 October 1970
• Docket Number: Civ. No. 19378.
• Parties: UNITED STATES of America v. Jack KROCHMAL and Theodora Krochmal.
• Court: U.S. District Court — District of Maryland

318 F. Supp. 148

UNITED STATES of America v. Jack KROCHMAL and Theodora Krochmal.

Civ. No. 19378.

United States District Court, D. Maryland.

October 21, 1970.

Stephen H. Sachs, U. S. Atty., and Alan B. Lipson, Asst. U. S. Atty., Baltimore, Md., for plaintiff.

Leonard S. Blondes and Blondes & Zaslav, Silver Spring, Md., for defendants.

THOMSEN, District Judge.

In this action the United States seeks to recover $3,208.16, plus interest, under a "guaranty" by defendants of a promissory note held by the Small Business Administration (SBA) as assignee of the payee bank. The issue presented is whether defendants have been released from their liability by reason of the stipulated facts.

On August 22, 1961, Flair-Acorn, Inc., executed and delivered to the Security Bank, Washington, D. C. (the Bank), its promissory note in the principal amount of $15,000 with interest as therein provided, payable in monthly installments of $250.00 beginning on September 22, 1961. The note was signed on behalf of Flair-Acorn, Inc., by defendant Jack Krochmal as its President and by Benjamin Herman as its Secretary. The note was secured by a deed of trust, also dated August 22, 1961 and recorded on the same date among the chattel records of Montgomery County, Maryland.

Jack Krochmal and Theodora Krochmal, the defendants herein, in their individual capacities guaranteed payment of that note by executing a separate instrument under seal (SBA Guaranty Form 148A), bearing the same date as the note, which read in pertinent part as follows:

"GUARANTY

"In order to induce Security Bank (hereinafter called `Bank') to make a loan or loans, or renewal or extension thereof, to Flair-Acorn, Inc. (hereinafter called the `Debtor'), the undersigned hereby unconditionally guarantees to Bank, its successors and assigns, the due and punctual payment when due, whether by acceleration or otherwise, in accordance with the terms thereof, of the principal of and interest on and all other sums payable, or stated to be payable with respect to the note of the Debtor, made by the Debtor to Bank, dated Aug. 22, 1961, in the principal amount of $15,000.00, with the interest * * * . Such note, and the interest thereon and all other sums payable with respect thereto are hereinafter collectively called `Liabilities.'

"* * * The undersigned waives any notice of the incurring by the Debtor at any time of any of the Liabilities, and waives any and all presentment, demand, protest or notice of dishonor, nonpayment, or other default with respect to any of the Liabilities and any obligation of any party at any time comprised in the collateral. The undersigned hereby grants to Bank full power, in its uncontrolled discretion and without notice to the undersigned, but subject to the provisions of any agreement between the Debtor or any other party and Bank at the time in force, to deal in any manner with the Liabilities and the collateral, including, but without limiting the generality of the foregoing, the following powers:

"(a) To modify or otherwise change any terms of all or any part of the Liabilities or the rate of interest thereon (but not to increase the principal amount of the note of the Debtor to Bank) to grant any extension or renewal thereof and any other indulgence with respect thereto, and to effect any release, compromise or settlement with respect thereto. "* * *

"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. * * *"

JACK KROCHMAL (SEAL) THEODORA KROCHMAL (SEAL)

On April 30, 1963, an instrument styled "Allonge" to the note of August 22, 1961, was executed by Flair-Acorn, by Mahar & Williams Printing Company, Inc. (Mahar), by the Bank, by defendants Jack and Theodora Krochmal, and by Benjamin Herman and Marcia Herman, who had also executed a guaranty of said note.

The so-called "allonge" recited (a) the note and deed of trust of August 22, 1961, (b) the desire of Flair-Acorn to sell to Mahar the chattels covered by the deed of trust in consideration of Mahar assuming as co-obligor the repayment of the indebtedness then owing on the note, (c) the consent of the Bank to such sale and assumption, provided Flair-Acorn, the original maker, and the Hermans and the Krochmals, the original guarantors, "affirm their original and continuing obligation for the repayment of said Note; and provided, further, that Mahar assume full responsibility, as a co-obligor, for the repayment of said indebtedness; and provided, further, that Mahar execute a chattel deed of trust on certain equipment now owned by Mahar". Following those recitals it provided:

"NOW, THEREFORE, by consent of the parties hereto, as evidenced by their signatures hereto, the aforesaid Note, on SBA Form 154A, as identified in the caption hereof, is amended, effective as of this date, as follows:

"1. Flair-Acorn, Inc. does hereby affirm its original and continuing liability for the repayment of said Note, notwithstanding the assumption of the indebtedness by Mahar & Williams Printing Company, Inc.

"2. Benjamin Herman, Marcia Herman, Jack Krochmal, and Theodora Krochmal, original guarantors on said Note, do hereby affirm their original and continuing liability for the repayment of said Note, notwithstanding the assumption of the indebtedness by Mahar.

"3. Mahar & Williams Printing Company, Inc. does hereby assume full liability for the payment of the balance of principal and interest due on said Note, the same as if it were an original maker thereof.

"4. All other terms of said Note, except as amended by this Allonge, to remain the same."

Jack Krochmal signed the paper as President of Flair-Acorn and as Secretary of Mahar, as well as in his individual capacity. Theodora Krochmal also signed in her individual capacity.

On November 12, 1964, the Bank assigned the note to SBA, without recourse, and transferred to SBA the guaranty of the Krochmals and the guaranty of the Hermans.

Sometime thereafter Lannes Williams or Mahar or both sold out of trust part of the property which secured the note, and defendants herein advised SBA and the Bank of that fact.

Thereafter, SBA entered into negotiations with Williams and Mahar, as a result of which a settlement agreement was entered into between SBA and Williams and Mahar, under which the SBA received on February 14, 1966, from Williams and Mahar a cashier's check in the amount of $4,275.00. The following recital on the reverse of the check was intended by Williams to be the agreement between the parties:

"RE: Flair Acorn, Inc., X-EMP-163, 613 Wash, the proceeds of this check are consideration of Agreement by S.B.A. with Lannes B. Williams to effect settlement as follows: of the proceeds hereof, $3,800.00 applied in restitu- (sic) of pledged equipment, balance of $475.00 applied to second deed of trust on property of Lannes B. Williams & Barbara M. Williams, his wife, which trust is to be paid in monthly installments of $50.00 commencing April, 1966, and payable the 15th of each and every month thereafter until $3,405.00 trust is paid in full and endorsement hereon by duly authorized official of the United States or deposit to account thereof to operate as release of all claims to civil or criminal action as against Lannes B. Williams, Mahar & Williams Co., Inc., and Maverick Lithograph Co., Inc. arising from above-numbered transaction saving only such cause of action as might arise on 2nd trust deed in a civil suit for collection or foreclosure."

SBA required that the reference to possible criminal action be deleted. Otherwise, the agreement set out on the back of the check represents the understanding pursuant to which SBA received the $4,275.00. On November 24, 1967, SBA received $3,405.00 in discharge of the balance of the $3,405.00 trust obligation referred to in the recital on the reverse of the check, leaving a balance due of $3,208.16, plus interest.

In addition to the present suit against the Krochmals, SBA has filed a companion suit in the District of Columbia against the Hermans on their guaranty.

The Krochmals, defendants herein, argue that the release of Mahar "has the effect of...