435
Chapter 26
Liability, Defenses,
and Discharge
Case 26.1
La.App. 4 Cir.,2010.
Jeanmarie v. Peoples
— So.3d —-, 2010 WL 987018 (La.App. 4 Cir.), 2009-1059 (La.App. 4 Cir. 3/16/10)
Court of Appeal of Louisiana,
Fourth Circuit.
Anthony JEANMARIE, et al.
v.
Mark A. PEOPLES, et al.
No. 2009-CA–1059.
436 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
Apparently, the Jeanmaries deposited the $110,303.86 check in their account on November 2, 2005. The delay in
making the deposit was related to Hurricane Katrina, but the timing of the deposit is not an issue in this case. On No-
vember 4, 2009, the check was returned NSF. Thus, the Jeanmaries property was effectively transferred from them
without compensation.
Mr. Peoples alleges that he has been unable to locate his files pertaining to the two transactions since Hurricane
Katrina.
At the March 20, 2009 hearing on the motion for summary judgment, the appellants argued that discovery was nec-
essary in order to determine why there were insufficient funds in the Pyramid trust account. Additionally, Mr. Peoples
argued that regardless of whatever liability Pyramid might be found to have, he could not be held personally liable.
The trial judge ruled in favor of the Jeanmaries in open court and signed the judgment ten days later. The
$168,607.72 awarded to the Jeanmaries represents twice the amount of the NSF check, less the $26,000.00 ten-
dered by Encore, pursuant to La. R.S. 9:2782. FN1
In a motion for new trial filed on April 9, 2009, Mr. Peoples and Pyramid asserted that Mr. Peoples signed the check in
his representative capacity only. Consequently he should not be held personally liable on the check or for the penal-
ties payable under La. R.S. 9:2782. This appeal follows the denial of that motion for a new trial.
Mr. Peoples does not dispute that he is the sole member of Pyramid Title and that he acted as the attorney/notary in
La. R.S. 10:3-402 concerning signatures affixed in a representative capacity provides as follows:
§ 3-402. Signature by representative
(a) If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of
the represented person or the name of the signer, the represented person is bound by the signature to the same
extent the represented person would be bound if the signature were on a simple contract. If the represented person
is bound, the signature of the representative is the “authorized signature of the represented person” and the repre-
CHAPTER 26: LIABILITY, DEFENSES, AND DISCHARGE 437
(1) If the form of the signature shows unambiguously that the signature is made on behalf of the represented
person who is identified in the instrument, the representative is not liable on the instrument.
(2) Subject to Subsection (c), if (i) the form of the signature does not show unambiguously that the signature is
made in a representative capacity or (ii) the represented person is not identified in the instrument, the representa-
tive is liable on the instrument to a holder in due course that took the instrument without notice that the representa–
tive was not intended to be liable on the instrument. With respect to any other person, the representative is liable on
the instrument unless the representative proves that the original parties did not intend the representative to be liable
on the instrument.
3. Subsection (c) is directed at the check cases. It states that if the check identifies the represented person the
agent who signs on the signature line does not have to indicate agency status. Virtually all checks used today are in
personalized form which identify the person on whose account the check is drawn. In this case, nobody is deceived
PH 504-484-0900
4332 CANAL STREET
NEW ORLEANS, LA 701119
The signature line is entitled, “AUTHORIZED SIGNATURE,” a designation not typically found on personal checks. It is
patent on the face of the check that Mark Peoples signed as the authorized signatory for Pyramid Title and not in his
personal capacity, consistent with La. R.S. 10:3-402(c). There is nothing subtle, obscure or ambiguous about this.
Therefore, we find that the face of the check, at the very least, is sufficient without more to raise a genuine issue of
material fact that Mr. Peoples did not sign in his personal capacity.
However, the plaintiffs contend that Mr. Peoples was required to plead as an affirmative defense the allegation that he
signed only in his representative capacity. As he did not do this, the plaintiffs contend that he is barred from doing so
for the first time in his motion for a new trial.
in the opponent’s favor.
Willis v. Medders,
00-2507, p. 1 (La.12/8/00), 775 So.2d 1049, 1050, citing
Independent Fire
Ins. Co. v. Sunbeam Corp.,
99-2181, 99-2257, pp. 16-17 (La.2/29/00), 755 So.2d 226, 236.
Therefore, at this stage of the proceedings, where we are conducting a
de novo
review of the record, we find that on
the face of the record there is, at the very least, a genuine issue of material fact as to whether Mr. Peoples signed the
check in his personal capacity.
[4] The trial court also rendered judgment against Pyramid, and Pyramid raises no defense based on the manner in
which the check was signed. Its only basis for appeal, as was noted earlier in this opinion, is that at the March 20,
2009 hearing on the motion for summary judgment, the appellants argued that discovery was necessary in order to
determine why there were insufficient funds in the Pyramid trust account. Pyramid contends that it was error for the
trial court to grant summary judgment against them prior to allowing them time to complete discovery.
portunity to present their claim, there is no absolute right to delay action on a motion for summary judgment until dis-
covery is completed.
Id.
This Court has described the discretion involved in the decision of whether to grant a continuance to permit further
discovery as “wide.”
Chatman v. Thor Offshore Boat Service, Inc.,
410 So.2d 784, 786 (La.App. 4 Cir.1982). The trial
court’s decision in this regard should only be reversed upon a showing of an abuse of that discretion.
Id.,
at p. 7, 923
CHAPTER 26: LIABILITY, DEFENSES, AND DISCHARGE 439
While the appellants may have an interest in pursuing discovery to reveal the conditions which led to the check pre-
sented to the Jeanmaries being dishonored by the bank as regards some claim the appellants may theoretically have
against a third party, we do not see the relevance of that issue to the claim of the Jeanmaries inasmuch as the check
issued to the Jeanmaries represents an unconditional promise of payment. La. R.S. 10:3–104. It has been four years
since this unconditional promise to pay them was rejected by the bank and payment still has not been made to them.
Moreover, the Jeanmaries contend that the following language found in the affidavit of Mr. Peoples offered in opposi-
tion to their motion for summary judgment contains sufficient explanation of why the check was returned NSF such
that further discovery is not necessary for purposes of this litigation, regardless of what rights the appellants hope to
discover in the future against third parties:
* * *
3. Encore failed to timely fund the second loan for $26,000, causing a shortfall for the transaction.
5. As a result of these shortfalls, there were insufficient funds to cover the check provided to the Jeanmaries in con-
nection with their sale of property on August 26, 2005.
In reviewing all of the factors noted above that the trial judge had before her when she made her decision to deny the
appellants request for further discovery, we cannot find any abuse of her wide discretion.
A. Whenever any drawer of a check dishonored for nonsufficient funds fails to pay the obligation created by
the check within fifteen working days after receipt of written demand for payment thereof delivered by certi-
fied or registered mail, the drawer shall be liable to the payee or a person subrogated to the rights of the
payee for damages of twice the amount so owing, but in no case less than one hundred dollars plus attor-
ney fees and court costs.
Case 26.2
861 N.E.2d 1246
Court of Appeals of Indiana.
Larry KEESLING, Vivian Keesling, Heritage Land Company a/k/a Heritage Land Co., Appellants–
Defendants,
v.
440 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
T.E.K. PARTNERS, LLC, Appellee-Plaintiff.
No. 18A02-0605-CV-411.
Feb. 28, 2007.
In January 1998, Heritage Land and M.G. Financial formed Heritage/M.G. for the purpose of developing a residential neighbor-
hood known as Ironwood Estates in Delaware County. On May 25, 1999, Heritage/M.G. executed the original note to Peoples
Bank and Trust Company, custodian for the James Henke, I.R.A. (“Henke I.R.A.”), in the amount of $300,000 to partially finance
the development. The final installment under the note was due June 1, 2001. The signatories to the original note were Green, both
personally and on behalf of Heritage/M.G. and M.G. Financial; McMullen, both personally and on behalf of Heritage/M.G. and M.G.
Financial; Larry Keesling, both personally and on behalf of Heritage Land; and Vivian Keesling. The original note was secured in
part by a mortgage from Heritage Land to the Henke I.R.A. on a thirty-six acre tract. FN1
* * *
This note and all extensions or renewals hereof are secured by a mortgage interest in real estate in Delaware County, State of
Indiana, per “Exhibit A and Exhibit B” dated May 26th, 1999, and executed in favor of the payee(s) hereof by Heritage/M.G., L.L.C.
Appellants’ App. at 54. Green and McMullen personally guaranteed the second note. No payments were ever made on the second
FN3. None of the parties to this appeal included the original complaint in an appendix.
5. T.E.K. is entitled to judgment against Heritage Land Company’s 36-acres of real estate and Heritage/M.G. LLC 10-acres of real
estate, in rem, and against the Defendants, Heritage/M.G. LLC, Thomas McMullen, Larry Keesling and Vivian Keesling, jointly and
severally, in personam, in the sum of $365,905.07 plus $10,000 in attorney fees, for a total judgment of $375,905.07. 6. T.E.K. is
also entitled to a judgment against Heritage/M.G. LLC in the sum of $324,728.74. 7. T.E.K. is entitled to an Order foreclosing the
May 26, 1999 mortgages upon both the 10 and 36 acres of real estate and foreclosing and barring all Defendant’s equities of re-
CHAPTER 26: LIABILITY, DEFENSES, AND DISCHARGE 441
demption and interest in the real estate. Appellants’ App. at 27. The Keeslings and Heritage Land bring this appeal.
DISCUSSION AND DECISION
* * *
[7] [8] [9] [10] [11] [12] [13] [14] [15] [16] The rules governing the interpretation and construction of contracts generally apply to
the interpretation and construction of a guaranty contract.
The extent of a guarantor’s liability is determined by the terms of his or
her contract.
The terms of a guaranty should neither be so narrowly interpreted as to frustrate the obvious intent of the parties, nor
so loosely interpreted as to relieve the guarantor of a liability fairly within its terms. The contract of a guarantor is to be construed
based upon the intent of the parties, which is ascertained from the instrument itself read in light of the surrounding circumstances.
A guarantor’s liability will not be extended by implication beyond the terms of his or her contract. “
A guarantor is a favorite in the
law and is not bound beyond the strict terms of the engagement. Moreover, a guaranty of a particular debt does not extend to other
indebtedness not within the manifest intention of the parties.
” Under Indiana common-law principles, when parties cause a materi-
al alteration of an underlying obligation without the consent of the guarantor, the guarantor is discharged from further liability
whether the change is to his or her injury or benefit. In
Yin v. Society Nat’l Bank of Indiana,
665 N.E.2d 58, 64 (Ind.Ct.App.1996),
trans. denied,
the court summarized the following rules relating to material alteration of a guaranty: “Guarantors and sureties are
exonerated if the creditor by any act, done without their consent, alters the obligation of the principal in any respect or impairs or
suspends the remedy for its enforcement.” Moreover,
when the principal and obligee cause a material alteration of the underlying
obligation without the consent of the guarantor, the guarantor is discharged from further liability.
A material alteration which will
effect a discharge of the guarantor must be a change which alters the legal identity of the principal’s contract, substantially in-
creases the risk of loss to the guarantor, or places the guarantor in a different position. The change must be binding.
Id.
at 585-
part: This Mortgage is given to secure the payment of the indebtedness of Heritage Land Company to [Henke I.R.A.], as evi-
denced by a Promissory Note or Notes dated on the 25th day of May, 1999, in the amount of Three Hundred Thousand Dollars
($300,000.00), at an interest rate of Twelve Percent (12%) per annum, shall also secure the payment of any sums guaranteed by,
442 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
advanced to or any obligation incurred by [Heritage Land] hereafter in favor of [Henke I.R.A.],…. It is understood by both parties
thorize the Henke I.R.A. to obligate the Keeslings further without their knowledge or consent. And, as T.E.K. acknowledges, the
mortgage expressly provides that Heritage Land’s consent is required before T.E.K. may “extend the time of payment” or “accept a
renewal note” unless Heritage Land has “parted with title to the mortgaged premises[.]” Appellants’ App. at 37. Heritage Land re-
mained in title, and no such consent was sought or given. Thus, the mortgage itself provides no grounds for holding either the
Keeslings or Heritage Land liable for funds advanced under the second note. [21] The trial court also concluded that the Kees-
FN4. The Keeslings and Heritage Land note that the assignments to and from the Henke I.R.A. and R.M.G. did not properly identi-
fy the Heritage Land mortgage, but any such error does not affect the issues on appeal.
The original note was past due. Henke testified that the second note executed on February 1, 2002, merely memorialized the bal-
ance due on the original note, that “the previous note had expired so we were … renewing an expired note and also confirming the
balance due on the expired note.” Appellee’s App. at 40. Thus, T.E.K. maintains that the second note merely extended the time for
Transcript at 137. [22] The evidence clearly shows that the second note did not merely extend the time of payment on the “current
amount of monies then due and owing” on the original note. Instead, the facts demonstrate that the second note included addition-
al money to “pay the bills.” Transcript at 137. The second note purported to add Heritage/M.G.’s accounts payable to the original
note. These payables were obligations of Heritage/M.G. for which the individual members of the LLC were not personally liable.
See
Ind.Code § 23–18-3-3 (a member of a limited liability company is not personally liable for the debts, obligations, or liabilities of
CHAPTER 26: LIABILITY, DEFENSES, AND DISCHARGE 443
second note of $102,000 brought total draws to $362,000. While T.E.K. contends, and as we have noted, the trial court found, that
the second note merely reflected the “current amount of monies then due and owing” under the original note, the total amount ad-
vanced under the two notes was $362,000 ($130,000 + $130,000 + $102,000), which was $62,000 more in draws than the original
note authorized. McMullen testified that “we had a cap of $300[,000] … we had paid down to $48[,000]” and Henke “allowed us to
take it back up under the terms of the old agreement” to $102,000. Transcript at 138. But the original note was a draw note with a
$300,000 limit, not a revolving line of credit.
See Black’s Law Dictionary
374 (7th ed.1999) (defining revolving credit as an ar-
The accommodation parties assumed the risk of a $300,000 loan, not some multiple of $300,000. [24] As we have already noted,
the capitalization of interest was a material alteration. And the inclusion of vendor payables and the capitalization of interest result-
ed in a third draw which, when added to previous draws, exceeded the face amount of the original note, another material altera-
tion. All of these purported alterations occurred without the knowledge or consent of the Keeslings or Heritage Land. On these
facts, the attempt to treat the second note as if it were one and the same as the original note must fail. And the second note was