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Alton Banking & Trust Co. v. Sweeney





Appeal from the Circuit Court of Madison County; the Hon. Norman H. Kinder, Jr., Judge, presiding.


This appeal is taken from a judgment finding the defendant, Nancy Sweeney, liable on promissory notes executed to the plaintiff, Alton Banking & Trust Company (bank), in connection with the operation of an automobile dealership by the defendant and her purported husband, Jesse Sweeney. The bank had originally obtained judgments by confession against both Nancy and Jesse Sweeney in three separate actions on notes to the bank, and Nancy Sweeney subsequently filed motions to open judgment in each case. The trial court granted these motions, opening judgment as to Nancy Sweeney, and the original judgments by confession became final as to Jesse Sweeney, who filed no motion to open judgment. Following trial on the merits in the three actions, which were consolidated for trial, the trial court found Nancy Sweeney to be liable on the notes in question and entered judgment accordingly. Nancy Sweeney appeals from this judgment, contending that she was released from liability on her personal guaranty of the notes because of a material change in the nature of the parties' business and that she was not liable for notes that had been signed in blank and completed after she was no longer involved in the business. We affirm.

As indicated, the instant appeal involves three groups of notes that were the subject of the actions consolidated for trial. The notes in case No. 81-L-204 (hereinafter case 204) were executed from August 1, 1980, to October 6, 1980, and contained two signature lines. The first line, prefaced by the word "Name" with the word "Dealer" printed below the line, contained the typewritten name of "Auto House." Immediately below was a line prefaced by the word "By" with the words "Owner, Partner or Officer" printed below it. This line contained the signature of Nancy Sweeney. The total liability on these notes was $8,350 plus interest.

The notes in case No. 81-L-205 (hereinafter case 205) were executed on January 4, 1980, and January 11, 1980, for a total liability of $28,935 plus interest. The first of these notes contained the name "Sweeney Chrysler Plymouth" on the line designated "Dealer" and was signed by Nancy Sweeney on the line designated "Owner, Partner or Officer." The second note also contained the name "Sweeney Chrysler Plymouth" on the line designated "Dealer" but was signed both by Lori McCoy, followed by the designation "Atty. in Fact," and by Nancy Sweeney.

The notes in case No. 81-L-206 (hereinafter case 206) were executed on January 7, 1980, and January 11, 1980, for a total liability of $101,895.66 plus interest. All the notes were in the name of Sweeney Chrysler Plymouth and were signed by Lori McCoy, with the designation "Atty. in Fact." On all the notes except one, Nancy Sweeney had signed as endorser on the reverse side of the note under language guaranteeing payment of the note. Nancy Sweeney's name did not appear on a note for $5,600 dated January 7, 1980.

Although not directly involved in this appeal, a fourth group of notes in case No. 81-L-207 (hereinafter case 207) were executed from August to December 1980 in the name of Auto House and signed by "Jesse Sweeney, Owner" on the line designated "Owner, Partner or Officer." The bank had obtained a judgment by confession against Jesse Sweeney on these notes and had subsequently amended its complaints against Nancy Sweeney after the opening of judgment in cases 204, 205 and 206 to assert liability against Nancy Sweeney on the notes in case 207 as a partner of Jesse Sweeney. The trial court found that Nancy Sweeney was not liable on the notes in case 207 and entered judgment in her favor. Since the bank did not appeal from that judgment, case 207 is not involved in this appeal.

Evidence at trial regarding execution of the notes in question revealed that Nancy and Jesse Sweeney had come to Alton in early 1974 to open a used car sales operation known as Auto House. They had previously operated a used car business in St. Charles, Missouri, for about 10 years. In Alton, the Sweeneys purchased property by contract for deed as husband and wife in joint tenancy for use in starting Auto House. Rental income from part of the property went into the Auto House bank account, and all contract payments and property expenses were paid out of the business account.

In January 1974 Auto House set up a line of credit with the bank in order to finance the purchase of automobiles for resale. Nancy Sweeney did not sign this floor plan financing agreement, but on January 29, 1974, both Nancy and Jesse Sweeney executed a personal guaranty of the indebtedness of Auto House with no monetary limit. The personal guaranty provided for the termination of future individual obligations under the guaranty upon receipt of written notice to the bank. Nancy and Jesse Sweeney also executed a signature card for the Auto House account, which contained no designation as to the type of business involved but merely stated "individual, partner or firm." As part of the agreement with the bank, collateral damage insurance was obtained in the names of Nancy and Jesse Sweeney "DBA Auto House," with the bank named as payee for any loss.

Under the floor plan financing agreement, the bank agreed to honor drafts that were written to sellers of vehicles purchased for Auto House. In return, notes, bills of sale and trust receipts were executed by the debtors evidencing the advancement of credit for the used car purchases. It was the practice of the bank in such financing arrangements to have the borrower sign the credit documents in blank to enable the bank to record information regarding the automobiles' serial numbers and the bank's security interest therein as soon as drafts were drawn on the borrower's credit. This practice was followed with the Sweeneys, and copies of the completed documents, consisting of the note, trust receipt and bill of sale, were always delivered to the Sweeneys. At no time did the Sweeneys object to signing these documents in blank. Nancy Sweeney occasionally signed the trust receipts at the business and brought the credit documents in later to the bank. Most of the bank's contacts with the Sweeneys were with Nancy Sweeney, as she was in charge of the office while Jesse Sweeney was involved with purchasing inventory for sale.

In April 1975 Jesse Sweeney entered into a direct dealer agreement with Chrysler Motors Corporation, and the Auto House name was changed to Sweeney Chrysler Plymouth, a new car Chrysler dealership. This agreement listed Jesse Sweeney as the sole owner of Sweeney Chrysler Plymouth. On April 3, 1975, an amendment was added to the floor plan financing agreement with the bank, stating, "We acknowledge the change on this agreement from AUTO HOUSE to SWEENEY CHRYSLER PLYMOUTH, with all other terms being the same." This amendment, and an identical amendment added to the personal guaranty agreement of January 29, 1974, were signed only by Jesse Sweeney, with an employee of the bank signing as witness. In addition, a "Certificate of Sole Ownership" was executed, listing Jesse Sweeney as sole owner of Sweeney Chrysler Plymouth and authorizing both Nancy and Jesse Sweeney to sign checks of the company and to borrow money on its behalf.

A bank employee, Lori McCoy, was authorized pursuant to a power of attorney executed by Jesse Sweeney to complete and sign credit documents for Sweeney Chrysler Plymouth so that drafts coming into the bank on new cars from Chrysler could be paid on the same day. Later, when the bank wished to consolidate notes on which some of the vehicles had been purchased, Lori McCoy signed the consolidation notes as "attorney in fact," and Nancy Sweeney was asked to come in and sign the notes for the dealership. While the notes dated January 11, 1980, in both cases 205 and 206 were executed in this manner, in case 206 Lori McCoy signed the note with Nancy Sweeney signing as endorser on the reverse side of the note.

Nancy Sweeney testified at trial that she was involved in the operation of both Auto House and Sweeney Chrysler Plymouth from March 1974 until May 1978. Throughout this period she worked at the business six and sometimes seven days a week. Although the Sweeneys had represented themselves to be husband and wife, they were never actually married, and, after their personal relationship ended in May 1978, Nancy Sweeney ceased her day-to-day involvement with the business, returning only one day a week to help with the office work.

The Chrysler dealership went out of business in late 1979, and the business was continued in 1980 under the name Auto House. The bank account was changed from Sweeney Chrysler Plymouth to Auto House, although checks were drawn on the Sweeney Chrysler Plymouth account as late as March 1980. Nancy Sweeney was never authorized to sign checks on the Auto House account. On March 7, 1980, Nancy Sweeney notified the bank through a letter from her attorney that she wished to terminate her personal guaranty with the bank.

A purported "marital settlement agreement" was executed between Nancy and Jesse Sweeney in February 1980 in which Jesse Sweeney quit-claimed all equitable interest in their real property under the contracts for deed to Nancy Sweeney and she gave up all interest in the business. Checks were drawn on the business account for contract payments and repairs to the ...

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