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United States v. Meadors

January 24, 1985


Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 82-C 920 -- S. Hugh Dillin, Judge.

Author: Cudahy

Before CUDAHY, POSNER and COFFEY, Circuit Judges.

CUDAHY, Circuit Judge. Appellant Meadors appeals an order of the district court granting the Small Business Administration (the "SBA") summary judgment in its action to collect from appellant as guarantor on a loan. The district court found that the Equal Credit Opportunity Act did not protect Meadors from liability; that she had waived certain protections by signing the guaranty; and that no independent consideration was necessary for her signature as a guarantor. On appeal she raises these defenses again, and also argues that, should she be liable, the district judge erred in calculating the interest due on the note. We reverse and remand.


In January, 1977, M.J.D., Inc. ("MJD") applied to the Bargersville State Bank (the "Bank") for a loan to pay off debts and to provide for additional working capital for a lumber company MJD owned in Bargersville, Indiana. The Bank's board of directors approved the loan subject to a guaranty by the SBA. In April, 1977, the SBA approved the request for a 56% guaranty of the $281,000 loan, but required the principals Melton Meadors, Jay Judd and Harold Ducote and Ducote's wife Marie to sign a guaranty on SBA Form 148. In the January application, listed on page four as possible guarantors had been: "Melton E. Meadors -- a single person, Jay A. Judd & Wife, Harold A. Ducote, Jr., & Wife." After considering the loan application and attached balance sheets, the SBA chose to have Meadors, Judd, Ducote and Ducote's wife sign the required guaranty.

On April 2, 1977, Melton Meadors and Betty, appellant here, were married. At the April 19 closing the three principals and their wives were all present. Although the SBA had provided places on its Form 148 for the signatures only of Meadors, Judd, Ducote, & Ducote's wife, and although no one from the SBA was present to request additional signatures, all six -- the three principals and their wives -- signed the guaranty form. Neither the SBA nor the Bank required Betty to sign any document as a prerequisite for disbursing loan proceeds. These facts are not disputed by either side.

MJD defaulted on its loan, and the Bank asked the SBA to take over the guaranteed portion of the loan. MJD turned over the collateral securing the loan to the SBA in July, 1980 and it was later sold. An action was subsequently instituted in district court to collect the deficiency from the guarantors, including Betty Meadors. Appellant raised several defenses, including lack of consideration and impairment of collateral. In November, 1983 appellee SBA filed a motion for summary judgment which was granted by the district court on February 2, 1984. It is from that grant of summary judgment that Betty Meadors appeals.

Appellant argues before this court that the Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq., protects her from liability; that there was not sufficient consideration for her signature on the guaranty; that the SBA willfully impaired the collateral; that she did not receive statutory notification of the sale of the collateral, and that the sale was not conducted in a commercially reasonable manner; and finally that the district court erred with respect to the amount of interest due, should she be liable on the guaranty.

There is apparently some confusion about whether Indiana law or federal law should govern in this case. In the district court appellant appealed to Indiana common law; the government has apparently relied on federal cases. Without raising the issue, the district court applied Indiana law.

Federal law governs questions involving the rights of the United States arising under nationwide federal programs. United States v. Kimbell Foods, Inc., 440 U.S. 715, 726, 59 L. Ed. 2d 711, 99 S. Ct. 1448 (1979). "In the absence of an applicable Act of Congress it is for the federal courts to fashion the governing rule of law according to their own standards." Clearfield Trust Co. v. United States, 318 U.S. 363, 367, 87 L. Ed. 838, 63 S. Ct. 573 (1943). Nevertheless, federal courts may turn to state law in attempting to give content to the federal rule in question. United States v. Kimball Foods, Inc., 440 U.S. at 727. Thus, on certain issues, such as impairment of collateral and the right to notice, where "the state law on which private creditors base their daily commercial transactions is derived from a uniform statute [the U.C.C.]," and there is therefore no conflict with the federal interest in uniformity, appeal to state law is appropriate. United States v. Kukowski, 735 F.2d 1057, 1058 (8th Cir. 1984). On those issues, then, we look to the Uniform Commercial Code, the Indiana statute based on it, and Indiana common law.


Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. Pro. 56(c). In the case before us the parties do not disagree about the facts, and our only role is to determine whether, on the facts as agreed, the district court was right as a matter of law.

A. The Interest

For reasons not apparent from the record, the district court granted the government's motion for summary judgment as to Melton Meadors, Jay Judd and Helen Judd on August 8, 1983, but as to Betty Meadors not until February 2, 1984. In its February 2 order the court assessed against Betty Meadors, jointly and severally with the other defendants, the principal sum of $152,720.04, together with interest on the note of $28,213.22 accruing before the August 8 entry of judgment against Melton Meadors and the Judds and "interest accruing thereafter at the legal rate."

The procedure for determining the interest due on judgments is set out in 28 U.S.C. § 1961:

Interest shall be allowed on any money judgment in a civil case recovered in a district court. . . . Such interest shall be calculated from the date of the entry of the judgment. . . .

Appellant argues that under the statute interest on a note accrues as provided for in the note until judgment is actually entered, and after judgment at a rate set by state law, and that since judgment was not entered against Betty Meadors until February 2, 1984, interest at the higher legal rate (the difference is apparently nearly half a percentage point) should not have begun accruing until then.

The government does not contest this point in its brief, and conceded it at oral argument. We hold that the district court erred as to the interest. On remand the district court should determine interest in a manner consistent with § 1961.

B. The ECOA defense.

Appellant asserts that her signature on the SBA guaranty form was obtained in violation of the ECOA and is therefore unenforceable; and that in disposing of the collateral the SBA wilfully violated her ...

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