Federal Financial Co. v. Landers

Federal Financial v. Landers (98-273); 169 Vt. 570; 740 A.2d 345

[Filed 8-Apr-1999]

                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 98-273

                              MARCH TERM, 1999


Federal Financial Company	       }	APPEALED FROM:
                                       }
                                       }
     v.	                               }	Washington Superior Court
                                       }	
Dexter A. Landers	               }
                                       }	DOCKET NO. 193-04-95 Wncv


             In the above-entitled cause, the Clerk will enter:

       Defendant Dexter A. Landers appeals a grant of summary judgment in
  favor of plaintiff  Federal Financial Company.  Defendant maintains that a
  genuine issue of material fact regarding  the capacity in which he
  co-signed an unsecured promissory note remained in dispute, and that  the
  trial court improperly denied him an opportunity to present defenses to
  payment.  Defendant  urges that the defenses of impairment of recourse,
  laches, and estoppel presented material facts  for resolution before a
  jury.  We affirm.    
  
       Defendant is president of Northfield Wood Products and has, on
  occasion, obtained loans  to finance businesses.  Defendant met Rima
  Burton, president of Comart, Inc., through his work  with the Central
  Vermont Development Corporation.  On August 11, 1992, Comart executed the 
  unsecured note for $25,000 at 8% interest with First National Bank of
  Vermont.  Burton signed  the note as president of Comart and individually
  to secure funds for a clothing business.   Defendant co-signed the note. 
  The document does not describe the capacity in which defendant  signed the
  Comart note, but his signature appears directly under Burton's. The note
  matured on  November 9, 1992 and, because of Comart's financial
  difficulties, was in default.

       On January 29, 1993, the State Banking Commissioner declared First
  National insolvent and  promptly closed it.  On February 3, 1993,
  defendant, apparently unaware that the Bank had failed  but cognizant of
  Comart's financial difficulties, sent a letter to one of the Bank's
  officers  expressing interest in purchasing certain assets of Comart if the
  Bank were to repossess those  assets as a secured lender.  Defendant's
  offer contained a condition that the Bank apply $25,000  of the proposed
  asset purchase price to the Comart note.  First National Bank was closed at
  that  time and never replied to the letter.

       The Federal Deposit Insurance Corporation (FDIC) was appointed
  receiver of the closed 

 

  Bank.  On April 6, 1993, FDIC sent a letter to defendant indicating
  that he was wholly liable for  the $25,000 plus accrued interest. 
  Defendant responded by letter on April 19, 1993 and offered  $5,000 cash to
  "clear all my obligations in this loan."  Defendant also acknowledged that
  he had  invested time and money in trying to keep Comart alive, but that
  his efforts had ultimately failed.  FDIC declined defendant's offer.

       Despite the notice to defendant that FDIC considered him liable on the
  note, defendant took  no further action to resolve the debt.  In November
  1993, Burton filed for bankruptcy protection,  and Comart dissolved. 
  Burton was discharged from bankruptcy in March 1994.  Plaintiff, Federal 
  Financial Co., acquired the Comart note from FDIC in 1995 and sent a demand
  letter to defendant  on February 13, 1995.  Defendant failed to pay the
  debt, and plaintiff sued.

       Defendant's principal defense was that plaintiff's unreasonable delay
  in pursuing payment  from Comart and Burton made it impossible to collect
  from them and deprived him of the  opportunity to be reimbursed by them. 
  Defendant also raised equitable estoppel and laches  defenses. 

       Our standard for reviewing a grant of summary judgment is the same as
  the trial court.  See  Madden v. Omega Optical, Inc., 165 Vt. 306, 309, 683 A.2d 386, 389 (1996). "Summary  judgment should be granted when, taking all
  allegations made by the nonmoving party as true,  there are no genuine
  issues of material fact and the movant is entitled to judgment as a matter
  of  law."  Id.  

       Defendant's primary contention here is that he signed the note as an
  accommodation  indorser, and as such, he acted as merely a surety rather
  than as a principal maker of the note.  He relies on the fact that his
  signature appears directly below Burton's and that, while her  signature
  line carries the designation "BY," nothing precedes his own.  Defendant
  argues that,  since his signature was rendered in an ambiguous capacity, he
  can be held liable only as an  accommodation indorser, rather than as a
  fully-liable maker of the note. 

       An accommodation party to an instrument is "one who signs the
  instrument in any capacity  for the purpose of lending his name to another
  party to it."  9A V.S.A. § 3-415(1), repealed by  1993, No. 158 (Adj.
  Sess.), § 11.  An accommodation maker differs from an accommodation 
  indorser in that the former "is bound on the instrument without any resort
  to his principal" while  the latter "may be liable only after presentment,
  notice of dishonor, and protest."  Id. comment  1;  see also Kokoletsos v.
  Frank Babcock & Son, Inc., 149 Vt. 33, 37, 538 A.2d 178, 180-81  (1987)
       (accommodation makers bound on instrument without resort to
  principal).  

       The trial court assumed that defendant signed the note as an
  accommodation indorser for  purposes of summary judgment and addressed his
  impairment of recourse defense.  Because we  find no ambiguity in the
  capacity in which defendant signed the Comart note and find him liable  as
  an accommodation maker, summary judgment was correct in any event.  The
  terms of the note on its face are clear.  The language that appears
  directly above the signature block in capital 

  
 

  script states succinctly "Notice to Co-Signer:  Your signature on this
  note means that you are  equally liable for repayment of this loan.  If the
  borrower does not pay, the lender has a legal  right to collect from you." 
  Furthermore, 9A V.S.A. § 3-118(e), repealed by 1993, No. 158 (Adj.  Sess.),
  § 11 provides that "[u]nless the instrument otherwise specifies two or more
  persons who  sign [the instrument] as maker, acceptor or drawer or indorser
  and as a part of the same  transaction are jointly and severally liable." 
  The note at issue does not specify that defendant  signed only as an
  accommodation indorser or that he retained any rights as a surety.  Given
  the  clarity of the language on the note, we cannot hold that any ambiguity
  existed to entitle him to the  surety defenses raised.  Defendant is wholly
  liable for payment because on the face of the note  he signed as a maker
  and as such he "engaged to pay the note according to its tenor."  Alexander 
  v. Chevalier, 98 Vt. 230, 234, 126 A. 498, 499 (1924) (construing prior
  statute);  see also  Bissonnette v. Wylie, 162 Vt. 598, 605, 654 A.2d 333,
  338 (1994) (Bissonnette I) (holding surety  defenses discharge co-maker if
  creditor has actual knowledge that co-maker has changed  relationship to
  that of surety and unjustifiably impairs collateral).     


       Affirmed.     
  


                                       FOR THE COURT:



                                       _______________________________________
                	               Jeffrey L. Amestoy, Chief Justice

                                       _______________________________________
                                       John A. Dooley, Associate Justice

                                       _______________________________________
                                       James L. Morse, Associate Justice

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice