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08/02/83 BUTLER STATE BANK v. D & G CONSTRUCTION

August 2, 1983

BUTLER STATE BANK, APPELLANT,
v.
D & G CONSTRUCTION CO., INC., EUGENE BUZZ DAVIS AND LOUISE DAVIS, RESPONDENTS.



From the Circuit Court of Bates County; Civil Appeal; Judge Harold A. Kyser.

Motion for Rehearing Overruled, Transfer Denied September 27, 1983. Application Denied November 22, 1983.

Before Turnage, P.j., Dixon, Pritchard, Manford, Kennedy, Nugent, Lowenstein, JJ.

The opinion of the court was delivered by: Manford

This is an action to recover monies claimed due upon promissory notes and to set aside a conveyance of farm property. The judgment is affirmed in part and reversed in part.

The judgment entered herein resulted from the combined rulings of the trial court and a jury verdict. This cause originated under a multiple count petition (seven counts), asserting claims against the respondents in varied capacities. Prior to addressing the points on this appeal and for purposes of clarification, Discussion is first focused upon six counts of the petition (Count VII severed as noted infra), *fn1 inclusive of the identity of the parties, consideration of pertinent evidentiary matters, the jury verdict, and the rulings of the trial court. Other factual matters, if any, relative to the Disposition of the points on appeal, are developed in the Discussion of those points.

Appellant, Butler State Bank, (hereinafter referred to as Butler) was the original plaintiff. In Count I of its multiple count petition, Butler sought recovery of $17,000, plus interest, as the claimed balance due under a promissory note (original face amount of the note was $26,000 plus interest) dated September 13, 1979. Recovery was sought against the D & G Construction Co., Inc. (hereinafter D & G) as maker of the note, and against defendants Charles Galloway, Verna Galloway, Buzz Davis, and Louise Davis in their capacities as statutory trustees of D & G. *fn2 On this count, the trial court directed a verdict in Butler's favor and against D & G and Buzz Davis (as trustee for D & G) in the sum of $17,000, plus interest in the sum of $3,824, and the sum of $3,500 for attorney fees. The court took no action against Charles Galloway, because he had filed his petition in bankruptcy and a stay order had been issued by the bankruptcy court. The court found, upon the evidence and as a matter of law, that Louise Davis and Verna Galloway were not statutory trustees of D & G. No appeal was taken from this portion of the judgment.

Under Count II, Butler sought recovery of the $17,000 (under Count I (supra) ) against defendant Buzz Davis in his capacity as guarantor of the note executed by D & G under Count I. The trial court directed a verdict in Butler's favor and against defendant Buzz Davis as guarantor in the sum of $17,000, plus interest in the sum of $3,824.30, plus $3,500 for attorney fees. No appeal was taken from this portion of the judgment.

Under Count III, Butler sought recovery against defendant Louise Davis in her capacity as guarantor of the note referenced within Count I. The trial court directed a verdict for defendant Louise Davis. Butler has appealed from this portion of the judgment. Discussion of the pertinent facts is found infra, relative to the Disposition of this point on appeal.

Under Count IV, Butler sought recovery of the sum of $70,000, plus interest, on a promissory note dated October 18, 1977 against defendant Charles Galloway as co-maker of the note. The trial court, in its judgment, acknowledged the stay order from the federal bankruptcy court and took no action on this count. No appeal was taken from this portion of the judgment.

Under Count V, Butler sought recovery of the sum of $70,000, plus interest, on a promissory note dated October 1, 1979 against defendant Buzz Davis as maker of the note. The trial court directed a verdict in favor of Butler and against defendant Buzz Davis in the sum of $70,000, plus interest in the sum of $17,335.07, and $3,500 for attorney fees. No appeal was taken from this portion of the judgment.

Under Count VI, Butler sought recovery of the sum of $70,000, plus interest, on the promissory note within Count V against defendant Louise Davis in her capacity as guarantor of the note. Butler moved for a directed verdict upon all counts of its petition, including Count VI. The trial court overruled Butler's motion and in addition to the directed verdicts discussed above, submitted the issue of guaranty by Louise Davis on the October 1, 1979 note (Count VI) to the jury. The jury returned its unanimous verdict for defendant Louise Davis. Butler has appealed from this portion of the judgment. Discussion of the pertinent facts is found infra, relative to the Disposition of this point on appeal.

After entry of judgment in accordance with the above results, Butler filed its motion for judgment N.O.V., in accordance with its motions for directed verdict at the close of its evidence and at the close of all the evidence, or alternatively for a new trial. This appeal followed the overruling of those motions.

In its point (1), Butler, in summary, charges that the trial court erred in overruling its motion for directed verdict under Count III of its petition. By its motion, Butler sought to have Louise Davis, as a matter of law, declared the guarantor of the note executed by D & G in the sum of $26,000, dated September 13, 1979, and to secure judgment against Louise Davis in the sum of $17,000, plus interest and attorney fees. It is noted that the trial court, under Count I and Count II, directed a verdict for Butler against D & G and Buzz Davis upon said note. On this count III, however, the trial court overruled Butler's motion and directed a verdict in favor of Louise Davis.

Butler contends that Louise Davis was the guarantor of this note, and that evidence upon the record proved this as a matter of law. At trial, Butler introduced a document (dated August 18, 1956) executed by Louise Davis to the favor of Butler, which was a guaranty to Butler for the granting of credit, including loans, to her husband, Buzz Davis. Evidence relative to the financial dealings between Buzz Davis and Butler at the time the guaranty was executed revealed that Buzz Davis borrowed $1,000 from Butler.

The evidence further revealed that in 1977 Buzz Davis and Charles Galloway formed a construction business, and incorporated it as D & G Construction Co., Inc. Buzz Davis and Charles Galloway borrowed an initial sum of $10,000 to operate D & G. While Louise Davis and Verna Galloway were officers and directors of D & G, in reality neither had anything to do with the operation of D & G. Through D & G, Buzz Davis and Charles Galloway did considerable business with Butler. Buzz Davis estimated the figure to be around $160,000. Payments and borrowings occurred from 1977 through early 1979. Buzz Davis and Charles Galloway got into a dispute, and Charles Galloway formed a separate company. Charles Galloway then filed his petition in bankruptcy.

Under this point (1), Butler contends that the guaranty executed by Louise Davis on August 18, 1956 remained in full force and effect as of September 13, 1979, the date of the note executed by D & G (Count I) and guaranteed by Buzz Davis. Butler contends that since Louise Davis issued her guaranty on behalf of her husband, Buzz Davis (August 18, 1956), and since her husband was the guarantor of the D & G note to Butler, then Louise Davis (as guarantor of her husband's obligations), as a matter of law, was indebted to Butler.

Much of Butler's argument stresses the compliance with notice and demand, and the admission by Louise Davis that she executed the guaranty dated August 18, 1956. Butler contends that demand of payment was proven by an unopened letter of demand sent to, but refused by Louise Davis. Butler further contends that demand was proven by the filing of this action. It is to the guaranty itself that Butler directs its strongest argument regarding the validity, and hence the enforceability, of the guaranty against Louise Davis. The pertinent portion of the guaranty reads as follows:

"TO BUTLER STATE BANK OF BUTLER, MISSOURI:

The undersigned hereby request you to give and continue to give, BUZZ DAVIS (hereinafter styled the 'borrower') from time to time, as you may see fit, financial accommodations and credit, and, in consideration of the sum of one dollar ($1.00), and other valuable considerations, the receipt of which is hereby acknowledged, and of financial accommodations and credit heretofore given or which may hereafter be given by you to said borrower, the undersigned hereby guarantee and promise and agree to make prompt payment to you, as they severally mature, of all overdrafts of said borrower, of all loans made, or which may be made by you to said borrower, of all moneys paid by you for the use of account of said borrower, and of all notes, acceptances and other paper which have been or may be discounted for, or at the request of, said borrower, whether made, drawn, accepted, endorsed or not endorsed by said borrower, and whether endorsed with or without recourse, and of any and all other obligations, of every kind and character, now due or which may hereafter become due from said borrower to you howsoever created arising or evidenced, and also of any and all renewals or extensions of any of the foregoing regardless of other collateral now held by you, or which you may hereafter acquire, as additional security to any or all of the indebtedness of said borrower.

"It is understood that the extension of time payment, or the renewal of any such indebtedness shall not in any way impair the liability of the undersigned hereunder, and that the undersigned will keep posted as to all ...


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